The NAB Business Survey for December is out today and shows relative stability in the confidence and business conditions components:
- Business confidence strengthened a little in December, although it remained below the series long-run average. Business sentiment over recent months has been seemingly resilient to the weakness in Europe, which has contributed to a slowing in global activity, perhaps reflecting the effects of the RBA’s recent interest rate cuts.
- Business conditions were unchanged in December, after edging higher in November, to remain consistent with an economy growing at around trend. While conditions remained fairly soft in December, they continued to hold up in the face of slowing global activity. As for the survey’s other indicators of activity, trading conditions, profitability and stocks all improved in the month, but employment, capacity utilisation and forward orders weakened. Credit demand and capex was also significantly weaker. Nonetheless, the survey’s activity readings over the December quarter are consistent with underlying demand growth of around 3½% and GDP (ex. coal) growth of around 3½- 3¾% in the December quarter (6-monthly annualised rate).
- Business conditions remained varied across industries but the disparity between the weakest and strongest performing industries narrowed in December. Conditions recovered remarkably in construction and manufacturing, while mining, recreation & personal services and retail conditions weakened. By state, conditions recovered very strongly in SA, which was the equal strongest mainland state with WA, while conditions were poor in Queensland and Victoria.
- Labour costs growth softened marginally in December, though remained elevated. Consistent with the soft CPI outcome for the December quarter, final product and retail prices remained subdued in December. Indeed retail prices were unchanged over the quarter.
So, the forward looking indicators are less rosy. Forward orders fell into negative territory after a brief bounce to zero in November, exports credit demand were lower and, perhaps most significantly, the employment index lost much of its impressive November jump, slumping to 1. The NAB index has a good history of leading labour market developments:
Today’s reading suggests slow ongoing job losses.
Across sectors, the two speeds remained very obvious, if a little closer together:
Though there was a big jump in manufacturing confidence, perhaps tied to the weaker dollar in December. It will be interesting to see if that sentiment survives into the new year.
Full report below.
