Overnight we saw the value of confidence. There was confidence that a Greek deal might get across the line with the Germans showing some flexibility and so up goes stock markets in Europe and in the US.
Positivity, favorable media stories and confidence will do that.
The Budget was a positive circuit-breaker and I was waiting to see what business sentiment would be like thanks to the Joe Hockey immediate tax write off for investment or business goods up to a value of $20,000.
Clearly, even though I write this from the island of Lemnos in Greece, I was hanging out for the latest reads on business and consumer confidence.
One excited me while the other thoroughly disappointed me!
The NAB business confidence reading in May went from +4.4 to +6.6 taking this important gradient for economic growth to a 9-month high! Better still the long run average number is +4.5, so this was a very nice result.
I like CommSec’s Craig James’ take on the figures: “The latest economic data is very encouraging – highlighting the misguided analysis of doomsayers when trying to analyse the recent (and very dated) economic growth numbers,” he argued. “Business confidence and conditions are improving; the outlook for the job market remains good; more home loans are being taken out to build homes (more supply); and Chinese inflation is contained, opening the door for more stimulus.”
And he threw this in: “The Reserve Bank is more concerned with what lies ahead, and there is good reason to be hopeful of stronger activity ahead.”
Business conditions went up nicely from +3.4 to +7.4 and this too is a nine-month high and as this is a now reading it looks very positive for business and future growth readings.
Against this good news comes the June consumer confidence reading from the Melbourne Institute and Westpac. This fell from a 16-month high to 95.3 and that was a 6.9% fall and the big worry was that the big spending group of 18-24 where the relevant index dropped 19.1%.
Women’s confidence dipped 3.6% to 95.4 while men lost 9.8% to 95.3.
The experts say the falling dollar has hurt confidence but ironically a lower dollar is good for the economy, the stock market and the jobs for the young people who have most lost confidence.
Two weeks ago one newspaper group ran with a ‘recession coming‘ story based on one economist’s view and it’s “dark clouds over the economy” story would have spooked a lot of Aussies.
The same newspaper failed to cheer the rising consumer confidence of 6.4% in May to a reading of 102.4. This was a big rise and deserved to be headlined but it was virtually ignored.
I think the failure to talk up the economy by the media, and in fact by doing the complete reverse, my media mates are actually hurting the economy — dare I day they are not only confidence killers but also economy killers.