Day: June 11, 2024

Australia business confidence turned negative in May underscoring that the economic activity continued to remain subdued into the second quarter, survey results from NAB showed on Tuesday.

The business confidence index dropped to -3 in May from +2 in April.

At -6, the forward orders index remained deep in the negative zone. Capex dropped four points to +4, while capacity utilization rose slightly to 83.3 percent.

Capacity utilization remained above average indicating that the process of bringing supply and demand back into balance remains incomplete.

Cost and price growth measures re-accelerated in May. Labor cost growth advanced to 2.3 percent from 1.5 percent in April and purchase cost growth climbed to 1.9 percent from 1.3 percent.

Product prices, retail prices and recreation and personal services prices also increased at faster rates in May. The survey suggested that inflation will continue to moderate only gradually from here.

The business conditions index slipped slightly to 6 in May from 7 a month ago.

Employment rose by three points, while trading conditions and profitability dropped three points each in May.

NAB Chief Economist Alan Oster said “Overall, the message here is a mixed one for the RBA.”

“There are warning signs on the outlook for growth but at the same time reasons to be very wary about the inflation outlook, and we expect the RBA to keep rates on hold for some time yet as they navigate through these contrasting risks,” Oster added.

The UK unemployment rate fell to the lowest since the middle of 2021 but the wage growth remained strong in three months to April, adding weight to the view that the next Bank of England interest rate cut will be in August.

The unemployment rate rose to 4.4 percent in the three months to April from 4.3 percent in three months to March, the Office for National Statistics reported.

The rate was forecast to remain unchanged at 4.3 percent. The 4.4 percent is the highest since mid-2021.

The employment rate was estimated at 74.3 percent in February to April period.

In the three months to April, average earnings excluding bonus grew at a steady pace of 6.0 percent from the previous year, as expected.

Average earnings including bonuses also logged a stable growth of 5.9 percent, which was faster than economists’ forecast of 5.7 percent.

Although UK wage growth remained strong in the three months to April, the unexpected rise in unemployment rate is likely to limit the future pay increases.

In May, payroll employment decreased 3,000 from the prior month to 30.3 million, data showed.

Further, vacancies declined on the quarter for the 23rd consecutive period. The number of vacancies fell by 12,000 to 904,000.

The number of working days lost because of labor disputes totaled 17,000 in April.

In May, the claimant count rose to 4.3 percent in May from 4.1 percent in the previous month. The number of people claiming benefits increased 50,400 from April.

“This month’s figures continue to show signs that the labor market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong,” the ONS said.

The stickiness of wage growth may not stop the Bank of England from cutting interest rates for the first time in August, provided other indicators such as pay settlements data and next week’s CPI inflation release show decent progress, Capital Economics’ economist Ruth Gregory said.

ING economists’ James Smith also said the BoE is on track for a rate cut in August, assuming services inflation proves less surprising next week.

The BoE’s monetary policy announcement is due on June 20. The bank has left its key policy rate unchanged for the sixth consecutive meeting in May. At 5.25 percent, the current bank rate is the highest since early 2008.

The KPMG/REC Report on Jobs, released on Monday, showed that starting pay for candidates increased in May amid reports of a competitive market landscape, alongside evidence of a ripple impact on base pay rates following increases in the national minimum and living wages.

That said, both permanent and temporary staff pay grew at a slightly slower pace than seen in April.

U.S. small business sentiment increased for a second month in a row in May to reach its highest level thus far this year, but the uncertainty perception rose to its highest in three-and-a-half years ahead of the general election, and inflation remained the main worry for business owners, results of a survey by the National Federation of Independent Business showed Tuesday.

The NFIB Small Business Optimism Index gained 0.8 points to reach 90.5, but the reading remained below the historical average of 98 for the 29th month. Economists were looking for a score of 89.8.

The index had sunk to 88.5 in March, which was the lowest level since December 2012.

The Uncertainty Index of the survey climbed nine points to hit 85, the highest reading since November 2020.

“The small business sector is responsible for the production of over 40 percent of GDP and employment, a crucial portion of the economy,” NFIB Chief Economist Bill Dunkelberg said.

“But for 29 consecutive months, small business owners have expressed historically low optimism and their views about future business conditions are at the worst levels seen in 50 years.”

“Small business owners need relief as inflation has not eased much on Main Street,” Dunkelberg added.

The NFIB survey said that 22 percent of owners reported inflation as their single most important problem in operating their business, unchanged from April. Inflation was also the top business problem among owners.

The share of survey respondents planning to hike prices rose to net 28 percent from 26 percent in April. The net percent of owners raising average selling prices was 25 percent, unchanged from April.

Hiring plans among small business also increased in May with the number of businesses planning to add staff rising to 15 percent, the highest reading of the year, from 12 percent.

Financing was a main problem for 6 percent of owners in May, up two points from April. The last time financing as a top business problem was this high was in June 2010, NFIB said.

Small businesses were turning slightly cautious on compensation packages, and 37 percent of owners plan to raise pay in May versus 38 percent in April.

The Federal Reserve is set to announce its latest interest rate decision on Wednesday. The FOMC, led by Chair Jerome Powell, is widely expected to leave the benchmark interest rate at 5.50 percent.

The stronger than expected growth in payroll employment and the increase in average earnings revealed by last Friday’s jobs report damped expectations for a September rate cut.

The strong labor market and wage growth are likely to make policymakers more cautious regarding policy easing. Economists continue to expect at least one interest rate cut this year.

The NFIB’s monthly jobs report had shown that net 18 percent businesses plan to raise compensation in the next three months, down three points from April and the lowest reading since March 2021.

Moreover, 42 percent of all owners reported job openings they could not fill in the current period.