“Feeling feisty” seems to be the bottom line of the latest survey of business conditions by the team of economists at NAB. It seems that sales, profits and employment have all grown in each of the past three months, although new orders have declined.

“This is not the softening data that the Reserve Bank would have expected, and we didn’t either,” the bank’s chief economist Alan Oster said.

Mr Oster said the Reserve Bank would again raise rates if the trend continued, a backflip on his previous view that the next move would be down. “Wages aren’t producing any sort of reduction of price pressures and purchase costs are going up, so inflation has to keep on rising”.

Amazing really. How could this be happening? New wages data later today will provide another shred of evidence, although we must recall the comment of RBA Governor Glenn Stevens that labour costs can rise in ways not captured by the wages data.

In consumer confidence news, the US ABC News/Washington Post Consumer Comfort Index jumped sharply in the week following the Republican-bashing mid-term elections, moving into positive territory for the first time in four and a half years. The index stands at +1 on its scale of +100 to -100, up four points to its best since April 2002.

Australians are not so optimistic. Although well and truly in positive territory (it’s scale is 0 – 100), the latest Roy Morgan Consumer Confidence Rating showed that consumer confidence fell 4.3 points to 111.5. The interviewing was conducted before last week’s rate hike, but following the news of the uncomfortably high inflation that would force another rate hike. Rate hikes play an important role in consumer confidence, with the Roy Morgan Consumer Confidence Rating plummeting to a five-year low of 103.7 after the last 25 basis point interest rate rise.

Read more at Henry Thornton.

Peter Fray

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