Nothing positive from the latest National Australia Bank monthly survey of business activity and confidence going into the last month of 2019 and into early 2020.
Business conditions tracked sideways in the month while confidence slipped back. And the NAB’s economists reckon there’s no imminent sign of any recovery.
Perhaps the only bit of positive news was the NAB’s observation that conditions appear to have stabilised at low levels, after declining significantly between mid-2018 and 2019. But the bank says the economy is not going anywhere.
The bank’s economists reckon that at the industry level “the divergence between the goods related industries (the weakest) and the services sector (the strongest) widened. The construction and manufacturing sectors have stabilised after previous large falls. Mining has also seen a significant pull-back on lower commodity prices,” the NAB said in yesterday’s monthly business survey.
NAB Chief Economist, Alan Oster said in yesterday’s commentary that “Business conditions appear to have stabilised with readings of between +2 and 4 over the past 3 months. The survey has tracked broadly sideways in recent months after showing a significant deterioration between early-2018 and mid-2019”.
“While conditions appear to have stabilised in aggregate, the gap between the worst performing industries – the goods related industries – and services widened further. Mining has also weakened substantially in recent months after having been the standout industry in the survey for some time.
“The business survey has mirrored the weakening in private sector demand over the past year or so. Retail, wholesale and transport & utilities are currently very weak and reflect the moribund consumer sector with official data also showing the weakest outcomes there since the early 1990s.
The bank said business conditions were unchanged in November at +4 index points (upwardly revised from last month). The employment index was unchanged at +4 index points, while trading conditions edged 1pt lower to +6. Profitability rose 3 pts to +3 index points.
“At these levels, the employment index remains above average but both trading conditions and profitability are below average,” the NAB pointed out.
Business confidence fell 2pts to 0 index points – unwinding the increase last month and remaining well below its long-run average of +6 index points.
By state, NSW and Tasmania are seeing the best conditions, while Queensland is now weakest.
“The recent optimism in forward-looking indicators unwound somewhat this month, with confidence falling back to 0 index points and forward orders reversing last month’s increase, to again be below-average and negative. Capacity utilisation has eased over the past two months and is now back around average,” the NAB said.
“Overall, the business survey is consistent with ongoing weakness in GDP growth (especially private demand) and suggests there has been little improvement in Q4 for GDP,” the bank observed.
Mr. Oster said “Some of the positivity we saw in previous months with the forward-looking components in the business survey appears to have faded. Therefore, while we think conditions are stabilising, we don’t see a significant recovery as being imminent.”
