Australian business conditions rose to a record level in October and the underlying details suggest that positive employment outcomes will persist over the near term, explains Daniel Gradwell, Senior Economist at ANZ.
Key Quotes
“These encouraging indicators support our view that wages and inflation will slowly but steadily improve from here, and we continue to expect the RBA will increase the cash rate twice in 2018.”
“Australian business conditions leapt to a record high in October, extending the trend improvement that has been underway for the best part of four years.”
“The details of the report were similarly positive. Of particular interest is the sharp increase in reported profitability, which is a useful leading indicator of demand for labour, and subsequent employment growth. We have previously noted that the strength in the official labour market data – with annual employment growth now running at 3% y/y and the unemployment rate falling to a four year low of 5.5% – has potentially overshot leading indicators, such as profitability and job ads. But this strong business report suggests that there is still room for further solid employment results through the remainder of 2017 and into 2018.”
“The strength in business conditions provides a welcome offset to pessimism about the outlook flowing from the recent weakness in retail sales. While it is hard to see the current level of conditions rising further or even stabilising at these levels, the outlook for employment is certainly positive. The next step in this process will be to see some improvement in wages, so we will be watching tomorrow’s wage data closely. We continue to believe that Australia is moving past the trough of wages growth and inflation, and subsequently we expect the RBA will eventually look to reverse the additional stimulus it injected in 2016 and so take the real cash rate back to zero.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD remains under pressure above 0.6400
AUD/USD managed to regain some composure and rebounded markedly from Tuesday’s YTD lows in the sub-0.6400 region ahead of the release of the Australian labour market report on Thursday.
EUR/USD faces decent contention around 1.0600
The knee-jerk in the Greenback reignited some buying interest in the risk complex and pushed EUR/USD to three-day highs near 1.0680, rapidly leaving behind the recent yearly low around 1.0600.
Gold eases despite risk-off mood
Gold trades in a relatively tight range near $2,390 in the second half of the day on Wednesday. In the absence of high-tier data releases, investors keep a close eye on headlines surrounding the Iran-Israel conflict.
Ethereum trades around the $3,000 support following a surge in validator queue
Ethereum (ETH) continued a sideways movement on Wednesday as investors seemed to be waiting for an upward or downward price catalyst. Despite the price stagnancy, the ETH validator queue - possibly fueled by the DeFi restaking boom - rose sharply.
Markets stabilize after Powell rules out rate hike, but the signs don’t look good
Markets are volatile right now; however, a relative calm has descended on the market and US. US stocks are down a touch, but the Vix is lower, US Treasury yields are lower, and the dollar is mostly lower vs. its G10 FX counterparts.