The National Australia Bank says business conditions and confidence are recovering from the dip caused by the January floods and cyclone in Queensland.
The bank’s business survey for February showed business conditions rose moderately to minus 2 from minus 6, to remain below the zero level that’s separates expansion from contraction.
However, business confidence rose 10 index points to 14 points in the month.
That was the second monthly rise in a row.
"Conditions have softened in WA and SA, and remain poor in Tasmania – NSW now has the strongest conditions," the NAB said.
"Although mining is getting back to normal and recreation is doing well, a brace of domestically focused industries continues to suffer – retail, wholesale, construction and manufacturing."
The survey showed orders remained weak and, despite rebuilding of mining stocks, stocks declined. The capacity utilisation rate was flat in the month.
The NAB said confidence rose in Queensland, in February, up 14 points to +24 index points, the highest level on record.
And business conditions in Queensland improved from the second lowest reading on record but remain very poor at -16 index points.
Trading and profitability appear to continue to suffer the after-effects of the January floods.
While there are signs that capacity utilisation is improving towards pre-flood levels (relative to the rest of Australia), forward orders remain very soft in Queensland
Business conditions in Queensland are no longer the worst in the country, that’s a title now held by South Australia where the business conditions index fell sharply in February to -20 index points.
The NAB said that in seasonally adjusted terms, conditions improved in all industries except retail, where they eased marginally.
Labour costs pressures continue to soften and inflation remains very low.
"Overall trading conditions (-3 points) and profitability (-5 points) remained particularly weak, despite some improvement in the month.
"Employment improved marginally to +1 index points.
"Overall, these readings are consistent with an economy that continues to travel relatively slowly, with the disruptive effects of the January floods still making their mark."
Summarising the survey, the NAB said:
Business confidence rose strongly for the second month in a row (by 10 points) to +14 points. The sense of relief was strongest in Queensland (up 14 points) as the business community looked forward to reconstruction. Confidence in the rest of Australia was up by a strong 8 points.
Business conditions by industry. Conditions improved in all industries except transport & utilities and retail. Mining conditions rebounded strongly (up 38 points) post-flood, and manufacturing and recreation & personal services also improved solidly.
Industry conditions provided stark evidence of a two-speed Australian economy, with conditions strongest in mining (+21) and recreation (+14) and weakest in retail (-16), manufacturing (-14), wholesale (-13) and construction (-11).
Cash flow was very strong in recreation & personal services and weakest in wholesale, retail and construction.
Business conditions improved in Queensland, NSW and Victoria. Conditions are now strongest in NSW (+8), followed by Victoria and WA, with Queensland (-17) and SA (-20) strongly negative.
Business confidence by industry. Confidence rose strongly in retail, recreation & personal services and wholesale in February, but fell back in mining and construction. Confidence was strongest in mining (+23), retail (+18) and manufacturing (+16), with the most pessimistic sector being wholesale (+4).
Business confidence by state. Confidence rose strongly again in Queensland (up 14 points to +24) and also rebounded in NSW, WA and Victoria, but declined in SA. Queensland is now the most optimistic state (+24), followed by WA (+19), Victoria (+14), NSW (+11) and SA (+1).
New orders rose marginally in February, up 2 point to -4, but have been negative for five consecutive months. Capacity utilisation increased to 81.1% and capital expenditure rose by 12 points in February into positive territory.
