On the face of it the latest business confidence and conditions survey from the National Australia Bank didn’t really add any greater understanding to the state of the economy.
And, nor will the Consumer Confidence survey from Westpac and the Melbourne Institute, which is out later today, along with housing finance figures for February.
The NAB survey showed that business confidence weakened to an eight month low in March as sluggish activity weighed on positive sentiment, and the rise in the value of the currency in the past couple of months also helped undermine sentiment.
But at the same time, the NAB survey showed that business conditions edged up in March, although it wasn’t by much as responding companies reported a fall in sales.
Business conditions (net balance) – conditions stabilise at low level
Source: NAB
But employment improved slightly while still suggesting the labour market remains soft (as the figures from the Bureau of Statistics tomorrow will confirm).
The NAB said that business confidence slipped from seven points in February to four points last month, while conditions improved from zero to one point in March.
Business confidence (net balance) – confidence eases further
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Source: NAB
Despite the soft readings, most industries recorded a lift in conditions, particularly in the mining sector. But the transport industry, as well as the "bellwether" wholesale sector, weakened significantly.
The NAB said that recreation and personal services continue to enjoy the highest level of business conditions.
"Near-term outlook still soft according to forward indicators. Inflation outlook well contained due to limited upstream pressures, and retail prices fell," the NAB reported.
"Economic growth forecasts unchanged with unemployment still expected to rise to 6½% by late 2014 and one more rate cut probable in late 2014."
Besides "the stubbornly high AUD" the NAB said other factors affecting confidence were the "uncertainty over the global economy and the potential for significant ‘belt tightening’ in the upcoming budget. Mining continues to be the least confident industry."
"Our wholesale leading indicator suggests much weaker underlying conditions, pointing to further below trend economic growth in the first quarter of 2014 of around 2½% and continuing weakness into Q2.
"Inflation pressures softened again in the month due to lower input cost pressures. In particular, purchase cost inflation eased in the month, resulting in a sharp fall in retail prices. Soft labour costs growth is consistent with increasing slack in the labour market," the bank added.
Looking at forecast for the economy, the NAB said the March survey left them "unchanged with rate cut still expected in late 2014 and unemployment to edge up, peaking at 6½% in late 2014".
"Dwelling investment and exports likely to strengthen, but expect (a) tight Budget to add to mining headwinds. GDP to grow at 2.7% in 2013/14 and 3.0% in 2014/15," the NAB forecast.
