The latest National Australia Bank business survey showed business conditions picked up in September as sales and profits rebounded while a marked rise in forward orders pointed to further growth in coming months.
The NAB’s monthly survey showed its index of business conditions rose one point to +8 in September, to remain above its long-run average. Its index of business confidence remained steady at +6, after the 2 point rise in August.
The NAB said measures of sales and profits both rebounded in the month, with sales hitting a strong +17, though employment fell back 3 points to +1.
A hefty 6 point jump in forward orders to a high +8, while the survey’s measure of capital spending which also climbed to a strong +8, points to a stronger pace of activity in coming months.
Despite that NAB economists said they still expect two more rate cuts from the Reserve Bank – although updated forecasts will not be issued until tomorrow.
“This outcome suggests good near-term prospects for activity – consistent with solid business conditions,” said NAB’s head of Australian economics, Riki Polygenis said in a statement with the survey.
Polygenis noted the strength in business conditions had become more narrow based in recent months as services outperformed, while the retail sector had turned lower that has been apparent now for the past six months!
“It suggests a multi-speed economy, but one where most key non-mining sectors are performing well in the near-term," she said.
"However, weakening retail conditions are a significant risk to our outlook, especially considering that consumption accounts for more than 50 percent of Australian GDP." The NAB said confidence levels “remain somewhat encouraging across most industries, suggesting a degree of resilience to external uncertainties."
"Beyond the near-term, however, the outlook is uncertain, particularly as the impetus from resource exports and the housing construction cycle start to fade.
“The headwinds, and persistently low inflation, are still expected to prompt the RBA to make two more 25bo cuts to the cash rate in H2 2017, to help firm up growth and stabilise the unemployment rate,” the NAB said.
Meanwhile, figures out yesterday from the Bureau of Statistics showed housing finance slowed in August.
While investor loans rose 0.1% from July, the number of owner-occupier home loan approvals fell 3% to a 15-month low.
The value of housing finance approvals, including loans to investors as well as home-buyers, has also fallen, to $31.413 billion. That’s 1% down on July and at its lowest level since April. It was also down from $33.04 billion in August 2015.
The total value of loan commitments to investors reached $11.9 billion in August compared with $11.8 billion in July. and more than $12.5 billion in August, 2015.
Housing finance commitments for the construction of new houses weakened sharply, suggesting building approvals may be nearing a peak. That’s despite solid approvals data for the past two months.
“Overall though, the level of activity in the housing market is strong and there is a significant backlog of work,” according to economists at the ANZ.
