I typically do not like to question reliable data sources but when they depart from the obvious reality it is time to do so. That time has come for the NAB business survey.
Yesterday the NAB survey showed a robust domestic economy powering along at virtual boom levels and that just does not square with wider data. For instance, the NAB survey showed business conditions at 2006 levels (all charts from Westpac):
Confidence may be lower but does anyone see 2006 conditions in the national accounts where nominal GDP – that is, the economy in which we all live – is chalk and cheese with 2006?
There are also distinct contradictions within the survey at the moment. Conditions are supposedly booming as space capacity remains high and investment collapses:
And as employment remains very soggy:
Is there an answer to these contradictions within the survey? Industry splits show solid conditions in every sector bar retail:
I put it to you that that those mining and construction measures are ridiculous in any traditional terms. Mining volumes may be OK but its investment, profits and employment are not and conditions does not seem to be picking that up. Likewise, we know that construction is booming in some cities and collapsing in others but the net outcome is down. We sought of see that in the state breakdowns:
NAB has confessed in the past that its survey under-represents mining but there appears to be more than that going on here in compositional problems. For one reason or another the survey is not picking up the investment bust in its headline indexes and as such it is misleading markets and policy-makers about the strength of domestic demand.
