The NAB Business Survey for August is out and retraced:
The strong improvement in business conditions recorded in July was short lived, unwinding significantly last month. The business conditions index dropped 4 points in the month (following a 5 point increase in July) to +4 index points. At this level, business conditions are still well up on 2013, but are significantly lower than the pre-GFC years and slightly below the long run average of the series (+5 since 1997) –suggesting the moderate economic growth environment is set to continue. In large part, the decline in business conditions during the month reflects an unwinding of some of the narrowly based gains seen in July. This was particularly stark in manufacturing, which dropped 13 points, following an 18 point improvement in July, to-4 index points –equal second lowest of the industries (along with mining). Looking through the monthly volatility, the trend in business conditions still looks reasonably positive, lifting 1 point to its highest level since 2010 (+5 points). Trend conditions rose in all industries except rec & persservices, which fell 2 points, and fin/ prop/ bus (unchanged), but are mixed in levels terms. Mining, retail and wholesale are lowest (-12, -6 and -6 points respectively), consistent with lower commodity prices and wages growth. Retail conditions slipped in August –mainly on the back of poorer trading outcomes. Overall the consumer remains anxious but not as much as during the recent Budget debate and implies moderate on going retail sales.Unsurprisingly, construction activity is elevated, as are personal and business services (which have consistently outperformed).
Business confidence eased back as well, but remains close to the improved levels seen since last years election. The index dropped 2 points (to +8), although outcomes vary significantly across industries. In July, most industries recorded a positive confidence index outside of mining. In August, mining, wholesale and transport & utilities were all negative (-10, -2 and -2 points respectively). Retail confidence remains positive, but fell sharply from last month (down 15 points) –consistent with our reservations over the optimism in July. Looking throughthe monthly volatility, trend confidence was unchanged (at +8), with construction and retail the highest. In trend terms, confidence is only negative in mining (-6), but soft in bellwether industries of wholesale and transport & utilities (both +2).
That’s a survey that’s going nowhere fast. The FIRE sectors are tearing it up alone:
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.
