The October NAB Survey is out and shows we’re entering a cyclical bounce. Here are the internals:
Confidence is at a three year high. Conditions still suck but are improving at a decent clip. Here are the component charts:
That looks like we’re just past the bottom. But there are reasons to expect a sharp bounce here. Forward orders have rocketed:
And restocking is taking hold:
Regular reader will recall that I made a big deal of destocking over the past six months. Whether there is any real improvement in demand at this point really isn’t terribly relevant. We’re entering a restock on improved confidence and that translates into a quarter or two of better growth.
Whether it translates into a sustained recovery depends upon whether or not capacity utilisation improves and new jobs are created. Capex did improve in the survey but is still very low:
I do not expect it to get far. Thus employment is at the bottom but that’s about all you can say for now (see above).
I have my doubts that the cycle can follow through with the mining capex cliff falling away but until March or so we’re likely to enjoy better times on the inventory cycle alone. If I’m wrong, interest rates will climb from mid next year, sharply.
Full report here.
