NAB Monthly Business Survey

Yesterday the NAB released their monthly (May) Business Survey. Business confidence rose during the 'green shoots' month by a significant 11.6 points to -2.2. It is still negative however and business conditions fell from -10 to -14.2. Summary is below:

* Business confidence improves as financial markets stabilise and Budget is stimulatory.
* Business conditions slip back with decline in trading conditions; steady profitability and sharply deteriorating employment.
* On a trend basis, however, business conditions were broadly steady.
* Forward orders also slipped back.
* Capacity utilisation fell to near cycle lows.
* April/May Surveys consistent with subdued domestic demand in June quarter.
* Global forecasts for 2009 slightly worse at -1¾% – with very large falls in Japanese activity and weaker European growth key drivers - but signs of stabilisation in the rate of fall in global activity emerging.
* Post national accounts revisions improve 2009 growth outlook to -½ per cent from -1 per cent.
* Business investment falling and consumption weak. Public investment takes up some of the slack and dwelling investment gaining traction in late 2010.
* Unemployment to reach 8% next year.
* RBA now on hold; less inclined to cut rates further, but we would not rule out late cycle cuts as unemployment rises, raising doubts about durability of growth outlook.

I saw a quote from NAB chief economist today in the paper in reaction to the markets pricing in the possibility of a rise in the cash rate "the chances of getting a rate rise this year are buckleys".

There are some good opportunities out there to take advantage of this premature exubarance. Locking in for one year for instance at 4.50% or even 2 years in the 5s will certainly help squeeze out a little bit of extra interest income.