Key facts
- Australian business conditions held steady in June, with improved confidence.
- U.S. small-business sentiment rose in June, but inflation was a significant concern.
- U.S. small businesses reported raising average selling prices at the highest rate since January 2023.
- Renewed U.S.-Iran tensions have led to an increase in oil prices.
- The Reserve Bank of Australia has raised interest rates three times this year.
Australian business conditions held steady in June, with cost pressures easing following a U.S.-Iran peace deal that temporarily eased global energy concerns. The National Australia Bank's (NAB) survey showed its index of business conditions remained at +3 for the third consecutive month. Business confidence also saw an improvement, rising to -5 from a deeply pessimistic -14 in May.
The survey indicated that product price growth eased back to its February level in June, and retail prices declined for the first time in seven years. NAB noted that these results are consistent with a slowing in activity growth but suggest the impact of the Middle East conflict on activity and prices was less severe than feared.
However, tensions in the Gulf have recently escalated, with renewed U.S. military strikes on Iran and the reinstatement of a blockade on shipping via the Strait of Hormuz. This development sent Brent crude prices up 2% to $85 a barrel, their highest point since mid-June.
The Reserve Bank of Australia has implemented three interest rate hikes this year, bringing the policy rate to 4.35% in an effort to combat global energy price shocks. While the central bank held policy steady in June, it warned that further tightening could not be ruled out.
In the U.S., small-business sentiment increased in June, with the National Federation of Independent Business (NFIB) Small Business Optimism Index rebounding 2.1 points to 97.4. This improvement likely reflected a retreat in gasoline prices due to a fragile ceasefire between the U.S. and Iran. However, the share of owners reporting inflation as their single most important problem was the highest in nearly two years, at 21%, and more businesses reported raising average selling prices, reaching 38% in June. The share planning to raise prices in the next three months eased to 32%, suggesting inflation may have peaked. Small business employment eased for the fourth consecutive month, and the share of owners reporting job openings they could not fill rose to 32%.