Ahead of the NAB Business Confidence and Conditions data due today, Goldman Sachs warn on perceiving a new normal in such surveys:
problems arise when respondents' baseline case in a below-average environment becomes the average ...
"A downswing in economic growth seven or eight years ago rightly saw business surveys as identifying business conditions as well below average"
"Yet as time has marched on, the absence of a material economic upswing would see an increasing number of businesses identifying the operating environment as around average and this would be reflected in the diffusion surveys reporting a rise from below average to average conditions.
"In the limit, a very extended period of no economic growth would eventual be recorded as average conditions."
Has Goldman Sachs rediscovered some sort of recency bias?
More detail at the Australian Financial Review article, which provides food for thought
Goldman Sachs were calling for an RBA rate cut last week, which we didn't get. Maybe they were thinking along these lines in doing so