NAB Survey bumps along the bottom

The NAB Business Survey for November is out and shows marginal improvement:

Business conditions and confidence broadly unchanged – with confidence still much higher than conditions. While still weak, business conditions appear to be trending higher. Trading conditions up – especially mining and manufacturing – with capacity utilisation off its recent lows. Against that, the employment index fell considerably – implying further deterioration in unemployment. Forward indicators also generally remain soft – albeit capex improved. Price inflation still moderate but margins under pressure from costs. Rate cut still expected in mid 2014. Unemployment key to how many cut(s) required. Domestic and global forecasts largely unchanged.

• Business confidence edged back a touch in November, suggesting that firms are continuing to reassess their lofty election related expectations given continuing sub par business outcomes. Nonetheless, the changed political environment, more accommodative monetary conditions and rising asset prices are helping confidence. Whether current confidence levels can be maintained given weak forward indicators remains a key question.
• Business conditions are still lacklustre – up a point to -3 points in November. Most interest sensitive sectors improved in the month, but services deteriorated – especially wholesale and transport. Mining conditions also moved off recent lows. But only recreation & personal services (consumers buying services) reports positive (strongly) business conditions – a clear outlier. Forward indicators remain soft with low capacity utilisation levels, no improvement in forward orders and stocks. Employment conditions fell heavily implying further jobs shedding. Falls were especially large in wholesale and finance. In contrast, capex improved, but remains subdued in trend terms.
• Our wholesale leading indicator suggests that below trend growth is likely to continue into the first quarter of 2014. A slightly more optimistic tone however comes from the improving trend in business conditions – implying underlying demand growth (6-monthly annualised) of around 3¼% in Q4 and 2¾% in GDP, above our forecast.
• Labour costs growth has held steady at restrained levels, consistent with the emerging slack in the labour market, while purchase costs growth eased a touch. Overall prices growth softened modestly in November, and when combined with relatively stronger cost pressures, this outcome suggests margins continued to tighten.

Highlights for me include the conditions internals which show better trading conditions but no intention to capitalise upon them by expanding staff:

On the other hand, capex did bounce nicely, though it could just be noise at this stage:

Capacity utilisation remains weak:

But the falling dollar is helping:

And all states are involved:

This is quite unconvincing. The survey is showing the marginal improvement in demand we’ve seen elsewhere and still has a post-election glow in confidence but it easily go either way. There’s no momentum here and little faith yet in the bounce.