The January NAB survey is out and whoa! confidence is back, up an astonishing 13 points, the most in decade:
Along with headline confidence, some components improved:
Conditions, profitability, employment, forward orders all edged up, though not by far less and the levels still suck (as does the absolute level of confidence).
That’s where the good news ends, as NAB says:
Business confidence improved considerably in December, after deteriorating to its weakest level since April 2009 in the previous month. Firms appear to have taken relief from a last minute agreement to delay the US ‘fiscal cliff’, while signs of strengthening in the Chinese economy have also helped. This, combined with another RBA rate cut in December is likely to have helped confidence.
- Business conditions however remain poor – albeit a touch improved in December. Of greater concern is the weakness in forward indicators of demand: with poor forward orders; capacity utilisation and capex at depressed levels; and credit demand back to record low levels.
- Wholesale business conditions collapsed in the final months of 2012 – to its lowest level in the history of the survey (since 1997). The weakness in wholesale conditions is a real concern as it appears to be a leading indicator of overall business conditions.
- The slight tick up in business conditions in December reflected modest improvements in profitability and employment conditions, partially offset by a slight deterioration in trading conditions. Overall, the survey implies underlying demand and GDP growth in the March quarter of around 2¼% and 2¾% respectively – a further slowing in growth from already below trend rates.
- Labour costs growth rose in December but remained fairly contained, purchase costs and product price inflation moderated slightly, all consistent very subdued on going inflation – now confirmed by the core CPI measures. Retail price growth in the survey remained soft overall.
NAB is still forecasting three rate cuts beginning in February. I disagree with the second but no that more cuts are coming.
2012m12 Subscriber details.pdf by Belinda Winkelman
