The NAB survey has put in a solid performance for September. Business confidence remained subdued but conditions and trading jumped. So too did the employment index. Forward orders was still in deep negative territory and exports are subdued.
Given the backdrop of global volatility, I see this as a very good result. As does NAB:
Business conditions improved in September, after edging down over the previous two months, with the outcome suggesting that the Australian economy may be stabilising. However, there are still signs that a swift recovery may not ensue, with forward orders remaining weak and stocks contracting a little in the month. Nonetheless, capacity utilisation bounced back, to be above long-run average levels. Overall, the Survey’s activity readings, if maintained at current levels, are broadly consistent with underlying demand growth of around 3% in the December quarter (at an annualised rate) and GDP growth (ex coal) of 3½%.
Business confidence rebounded sharply in September, in line with better conditions and helped by the sharp depreciation of the AUD coupled with speculation that domestic interest rates will be reduced. Confidence rose across a majority of industries in the month, with a particularly strong rise in manufacturing implying that the lower AUD provided some relief.
Conditions improved in all industries other than personal & recreational services – which was unchanged at strong levels. During September there were large gains in manufacturing and mining conditions. Despite this, conditions remain at depressed levels in manufacturing, construction, retail and wholesale.
Labour costs growth eased a little in the month, after solid outcomes in the previous two months.
So, the bounce I’ve been expecting as interest rate expectations have stabilised is here:
As you can see, we’re coming off some pretty nasty downtrends and September really only steadies the ship. If we look sector by sector, we’ll see something of a split:
There’s been a decent jump in conditions in retail, lending more support to the notion that stabilisaing rates has loosened wallets a little (as we’ve seen in the last couple of months of retail sales). There is no evidence of this flowing through to banks or realty yet. We’re still debt-averse.
But the big jumps in the month were in manufacturing, with exports, general and employment conditions all leaping (though still negative). It’s wonderful what a lower dollar can do (take note manufacturing lobbies).
In terms of states, the uptick was across the board:
With the employment index bouncing into positive territory, this report mitigates against any immediate rate cut.
