Business confidence up; conditions down


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By CommSec

Business survey: The NAB business conditions index eased from +6.6 points to +5.3 points in November (long-term average +4.8 points). The business confidence index rose from +4.3 points to +5.0 points (long-term average +5.8 points). The survey was conducted from November 21-29.

What does it all mean?

Australian business conditions remain solid, with the latest survey reading still well above the long-term average. More importantly confidence rose a touch, no doubt supported by improvement in the global economic environment and stronger sharemarkets.

What do the figures show?

National Australia Bank Business Survey:

  • The NAB business conditions index eased from +6.6 points to +5.3 points in November (long-term average +4.8 points). The business confidence index rose from +4.3 points to +5.0 points (long-term average +5.8 points). The survey was conducted from November 21-29. In rolling annual terms, the business conditions index eased further from 8-year highs (10.2 points July 2016) at +9.2 points.
  • NAB said “The deterioration in business conditions this month was most pronounced in retail (down 10) and transport & utilities (down 9), while recreation & personal services was the only other industry to fall (down 3). In contrast, mining (up 13) and manufacturing (up 9) were the most improved industries – although conditions in mining remain quite subdued overall. In trend terms (3mma), conditions are still highest in finance/ property/ business (FPB) (+17) and recreation & personal services (+16), but lowest in mining (-12) and retail (-5). The largest rise in business confidence came from mining (up 9), while transport (down 12) saw the biggest improvement – coinciding with the recent OPEC agreements. “
  • Components: the index of trading conditions eased from +11.2 points to +9.9 points; employment eased from +0.8 points to +0.6 points; profitability eased from +7.4 points to +5.5 points; forward orders were steady at -0.1 points.
  • Inflationary indicators were again mixed in November. The monthly reading of labour costs rose at a 0.7 per cent quarterly rate in November, after a 0.9 per cent lift in October. Purchase costs rose at a 0.5 per cent quarterly rate in November, after 0.3 per cent increase in October. Final product prices were up by 0.3 per cent in November after a 0.2 per cent gain in October. And retail prices were flat in November after a 0.2 per cent decline in October.
  • Capacity utilisation rose from 80.7 per cent to 81.3 per cent – marginally above the long-term average of 81.0.
  • The proportion of firms reporting that they did not require credit eased from 72 per cent in October to 50 per cent in November.

What is the importance of the economic data?

The monthly National Australia Bank business survey is valuable in providing a timely reading about the health of Corporate Australia. Key indicators of business conditions such as orders, employment, profitability and capacity use are covered together with a gauge on confidence levels.

What are the implications for interest rates and investors?

CommSec expects the Reserve Bank to remain on the interest rate sidelines for an extended period.

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