Via Westpac:
The NAB business survey for December is a headline grabber. Business conditions have collapsed, with the largest monthly fall since the GFC. Declines were broad-based across states and industries.
The business conditions index fell by 9pts to be at +2, a below average reading (for the monthly survey, dating from March 1997). Conditions are down sharply from the first half of 2018, when the index averaged +18.
This is the softest reading since September 2014, prior to the recent strong housing upswing gathering a head of steam.
Business confidence was steady at +3, a below average reading, down from +9 on average in the first half of 2018.
The key question – is the December update a ‘false read’ or a watershed moment?
The survey was conducted from January 8 to 14. (Typically the survey is conducted in the final week of the month but that’s not feasible for December.)
As always, caution should be taken when interpreting data over this period – with most still on holidays data can be particularly volatile at this time of year.
At face value, the fall in business conditions over the second half of 2018 suggests a significant slowing in the economy.
If the December update is accurately describing conditions across the Australian economy then this is a watershed moment. For policy makers, economic growth forecasts of 3% plus would need to be marked materially lower.
I don’t think it is a sampling error. The survey is corroborated by other data such as free falling house prices, the triple tanking of AIG PMIs, the atrocious CBA retail spending data, crashing car sales and mounting profit warnings.
It is all soft data but it is telling the same story: the economy hit a seven meter thick brick wall in December.
Full report.
