A perplexing NAB business survey for October is out today:
• Clearly the most surprising feature of the Survey was the sharp jump in business conditions in October (the largest monthly increase in the history of the survey). The improvement driven by sales and profits was relatively broad based – unlike the (shortlived) jump in July. While welcome we remain cautious re the sustainability of the improvement. For example it does not sit well with further falls in business confidence and only marginal improvement in capacity utilisation. While the falling AUD may have helped many sectors, it is probably also behind the large falls in the wholesale and transport/utilities sectors. The jump in conditions also saw employment improve somewhat – consistent with other labour market partials.
• In that context the further fall in business confidence was surprising. This is the first time since 2012 that confidence has dropped below conditions, suggesting firms remain uncertain over near-term demand in their industry. Confidence levels vary greatly across industries, but services have consistently been the most optimistic. To complete the mixed messages about the future, forward orders improved significantly but conditions in the ‘bellwether’ wholesale industry are still quite weak.
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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.
