The upturn in business conditions that strengthened noticeably in June, continued into July, while business confidence, which started improving a month or two earlier, is now travelling at levels not seen for two years and is close to its long term average, according to the latest survey from the National Australia Bank.

In some ways it’s no wonder with the government stimulus, building approvals and strong stockmarket all generating a flow of positive news in the past month or so. The results of the survey continue the rush of goodish news about the economy, which was supported this morning by a much stronger than forecast annual profit from leading electricals retailer, JB Hi Fi.

However that result is a bit of a one off… other results (Crane Group profit down yesterday and Dexion loss today, both deeply involved in the manufacturing and service sides of the economy) were not so good and Dexion described the six months to June as among the toughest ever experienced by the group this decade.

The NAB said while there were gains in confidence and business conditions in July, business conditions were weaker than those for confidence, with employers still shedding labour, but at a “significantly reduced”. And the NAB says it still expects “the current surge in growth to be temporary. That is, we still expect consumption to weaken in H2 as the cash bonuses wash out and unemployment increases.”

Here’s the number crunch:

  • 0: the 2009 GDP estimate (up from -0.5%) and 2010 to 1.25%. Yes black is now the colour of the NAB’s growth rates, from the previous red ink. “The Survey clearly points to an accelerating growth momentum,’ the NAB reported. “We have incorporated that into our forecasts for the June quarter which raises the 2009 GDP estimate to zero (from -0.5%) and 2010 to 1.25% (previously 1%).”
  • February, 2010: the month when the NAB sees the RBA making its first rate rise of 0.25%, but should we continue to get better than expected news, the rate rises could start in November of this year. The cash rate could hit 4.5% by the end of next year.
  • $94 million: the much stronger than forecast annual profit out this morning from leading electricals retailer, JB Hi Fi. JB boost earnings 45% to $94 million, higher than even the company was forecasting a month ago.
  • 6: the number of points that business confidence will rise, to a new recent high of plus 10 points in the NAB survey: “the best since August 2007 and is now approaching long run average levels. The improvement was very broadly based but especially noticeable in construction, wholesaling, transport and manufacturing (over recent months).”
  • 2: the number of points that employment jumped this month to -5 points. Trading edged higher by 1 point and profits by 2 points (to overall readings of +4, +1) and helped boost business conditions overall. The NAB said ‘broadly all of these measures have returned to levels last reported in mid 2008. Gains in activity tended to be concentrated in, the previously very weak, construction and manufacturing sectors and to a lesser extent finance. Against that, retail & wholesale fell significantly and transport was flat — indicative of weaker consumption.”
  • 5: the number of points forward orders moved up — up 5 points (from zero last month) to the strongest level since December 2007. “This jump was driven by stronger orders in manufacturing, construction and mining. Retail (especially cars) & wholesale orders were sharply lower.”
  • 80.4: the percentage that capacity utilisation edged, up to 80.4% from 79.3% while stocks continued to be run off aggressively — with an unchanged index of -10.
  • 0.2: the percentage rise in the NAB’s measure of labour costs, which gave “a record low reading of 1% in the year to July.”
  • -0.2: the percentage that prices across the economy fell last month, giving an annual rate slowed to 1.6%. 0.4% was the rise in retail prices though, for a 4.0% gain for the year.
  • 7.3%: the NAB’s new jobless rate forecast, down from 8% previously (and lower than the ANZ’s 7.5%).