Two confidence reads landed this morning, and the headlines flatter the reality. Business confidence bounced hard but is still deeply negative, while consumers gave back most of last month's reprieve.
From NAB's business survey (May):
- 📊 Business confidence rose to -14 (⬆️ 10pts)
- 📊 Business conditions held at +3 (↔️)
- 📊 Profitability slipped to -1 (⬇️ 1)
- 📊 Forward orders recovered to 0 (⬆️ 5)
- 📊 Capacity utilisation fell to 81.9% (⬇️ 0.5)
- 📊 Purchase cost growth eased to 2.6% QoQ-equiv (⬇️ 1.9)
From Westpac-Melbourne Institute consumer sentiment (June):
- 📊 Headline index fell to 80.6 (⬇️ 2.9%)
- 📊 Family finances vs a year ago dropped to 67.3 (⬇️ 7.5%)
- 📊 Family finances over the next 12 months fell to 85.1 (⬇️ 8.5%)
- 📊 House price expectations fell to 128.2 (⬇️ 14.9%)
- 📊 Unemployment expectations held at 139.8 (↔️)
Don't read too much into the confidence bounce. A 10-point jump off a near-record low still leaves it at -14 and negative in every industry. Conditions are the number that matters, stuck at +3 and below average with profitability now negative. That's a margin squeeze, costs still rising faster than firms can pass them on, while capacity utilisation slips below 82% for the first time in a year. The easing in cost growth is a change story, not a level story. Prices aren't falling, they're climbing less violently.
The consumer read is the more honest of the two. May's lift was built on a temporary excise cut that's about to reverse, and June handed it back. Households are bracing, with the forward view on family finances near its lowest in five decades. The crash in house price expectations is the new wrinkle, below its long-run average for the first time in nearly three years, lining up with the budget's investor-housing changes and rate-hike fears. When the wealth effect wobbles, spending follows.
Both reads point the same way into the RBA on 15-16 June. Weak demand, sticky cost pressure. For SMEs, demand is not coming to rescue your top line, so the game is margin and cash. Cost growth being "less bad" is not relief, and the profitability squeeze in the business survey is exactly what you should be stress-testing for.