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The illion Business Expectations Survey presented a positive outlook for the economy.
Business profits expectations for 2018 are the highest they’ve been since 2011, with companies set to boost employee numbers in the first quarter on the back of the positive outlook, according to illion’s latest Business Expectations Survey.
Data from the survey indicated businesses operating in the Finance, Insurance and Real estate sector had the highest profit expectations approaching the new year, followed by the Transport, Communications and Utilities sector. The survey shows that overall, the Business Expectations Index is up 25.7 percent on the same period last year and the actual performance of businesses across all sectors is at a 13 year high.
Stephen Koukoulas, illion Economic Adviser, said there were a number of factors driving the positive outlook for 2018. “Corporate profits are getting a boost from lower costs, which are being driven by record low interest rates and on-going low wages growth – which is all occurring at a time of solid gains in the ASX”.
The Australian economy continues to grow, but the pace of expansion remains moderate, being constrained by ongoing weakness in household spending and a slide in housing construction. The good news is further evidence of an upturn in private business investment and stronger growth in public sector infrastructure spending which is providing support for the economy.
At face value, 2.8 per cent annual GDP growth rate is quite good, but the devil in the detail on how that growth has been registered is why there are some concerns about the sustainability of the expansion as 2018 looms.
Household spending remains mired with growth of just 0.1 per cent in the September quarter. It seems the very low wage growth evident in recent years, plus data showing a small rise in the household saving rate, is keeping consumer spending in check.
Making up well over half of GDP, household spending will be the vital element of the economy into 2018. If wages growth remains weak, there seems little prospect of a pick up in household spending. And if household spending remains weak, bottom line GDP growth will be relying on a strong expansion in business investment and public sector demand.