The quarterly version of NAB’s business survey is out this morning and shows status quo weakness:
Business conditions improved modestly in the September quarter though were unable to recover the sharp fall in the previous quarter. Official ABS data point to relatively soft activity in the September quarter, following a fairly robust first half of the year; our survey implies a slowing in annualised domestic demand growth to around 3% (six-monthly). Measures of future near-term demand remained at very subdued levels, pointing to further slowing in activity in the December quarter.
While still reasonably poor, business conditions in some of the consumer dependent and housing related industries improved in the quarter, suggesting lower borrowing rates may be beginning to help. While the mining sector remains a big part of Australia’s growth story, it appears that a slowing in global commodities demand and prices are now impacting on mining activity and confidence. Conditions improved across each of the mainland states; conditions were strongest in WA and NSW, while they were weakest in Victoria and Queensland.
Business confidence improved marginally in the quarter, but remained at downbeat levels. It appears that global uncertainties (especially on the mining outlook), the persistently high AUD, weak forward orders and the impact of fiscal consolidation (State and Federal) are weighing on firms future expectations.
Business investment intentions (next 12 months) weakened a touch, consistent with our expectation for a softening in business investment growth over the year ahead. Near-term and long-term employment expectations remained lacklustre and consistent with our expectation for little near-term employment growth. Lack of demand is expected to be the most significant factor impacting on profitability over the year ahead, while concerns about interest rates, wages, capital capacity and suitable labour were low.
Product price inflation remained weak, recording annualised growth of just 0.7%. Retail price inflation was practically flat (implying Q3 core CPI of around 0.5%) – suggesting that the indirect effects of the carbon tax are yet to flow through. Labour and purchase costs growth was within ‘normal’ ranges.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
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.
