I don’t usually bother with the quarterly NAB Business Survey, not because there is anything wrong with it, there isn’t, but the monthly versions are usually enough. But on a slow afternoon I thought I’d take a look and what I found was not pleasant. In fact, the survey is a complete dog. Despite a rise in the headline number, the internals are ugly:
Business confidence has fallen into negative territory. There’s a slight rise in current conditions but big falls in expected conditions in the short and medium term and, significantly, large falls as well in capex intentions. There is now a strong disinflationary trend across the cost and pricing power measures. Trading improved nicely, as we’ve seen in the monthlies but exports, employment and forward orders all weakened. And inventories are climbing. That is a toxic mix.
To cut a long story short, if this survey had been presented any time before 2008, you could have put your house on monetary easing. That the government is planning unprecedented fiscal cuts in this environment shows just how big is our bind.
One doesn’t like to get too gloomy, but this deterioration has followed two rate cuts in November and December, as well as more recently a solid stock market rebound and a stabilisation in Europe. That’s not encouraging.
