Yesterday’s quarterly NAB Business Survey threw up a shocker for December. However, this blogger is more interested in the recently released monthly survey,which shows what a pounding business conditions took in January (find both below):
Trading, profitability, employment, forward orders, stocks, exports all smashed.
NAB foists the blame onto the QLD floods:
Business conditions tumbled 12 points nationally in January, pulled down by the severity of the Queensland floods. There were particularly severe impacts on trading conditions (down 16 points to -7 points) and profitability (down 13 to -10). Employment fell 5 points to a zero net balance, although all of this occurred outside Queensland where the employment index improved. However, the sharp decline in business conditions and capacity utilisation in Queensland (see Focus on Queensland) suggests that hours worked declined heavily there.
Which is probably fair enough.
But the survey internals show up another dynamic, that over the past twelve months business conditions have steadily weakened. The state by state conditions bears this out:
Everywhere outside WA has been trending strongly downwards for a year. This is much bigger than flood damage. It’s an increasingly intense struggle in the services economy to get by:
The sectoral comparison shows the same pattern with retail, wholesale and manufacturing all deteriorating consistently for twelve months and in negative territory. Even construction is the same and it’s supposed to be suckling at the teat of the mining boom.
No guesses for why. The sector that leads them all, finance and realty, is also slowly but surely weakening.
Everything took a trend-accelerating downward hit in January, to the point where employment intentions are now zero.
No doubt there will be a bounce back in February but the larger trend looks entrenched and this blogger’s guess is that any bounce will be shallow or short-lived or both. As this blogger has said before, the disleveraging economy (that is, with falling demand growth for credit) has a fundamentally weak character. It is much closer to stall speed than the old leveraging-up economy. By way of example, let’s look at business conditions in the NAB survey for mid 2007, the last mining boom:
Basically, the two cycles are inverse reflections of one another.
The final giveaway comes from the presentation of the survey itself. Throughout it’s life, the NAB survey has graphed data through long time series extending back ten years. Now, it gives you two. The comparison is so bad that it’s upset NAB’s PR department.
There is no rate rise here. In fact, in the old normal, a survey this weak would clearly signal cuts. Worse, this is not an economy muscling up to absorb another shock, like an enduring spike in oil.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.