MYER AFR 070327 PIC BY JESSICA SHAPIRO… GENERIC Myer, department store, Bourke St, Lonsdale St, consumer, customer, retail, sale, shopping, consumer, revamp… AFR FIRST USE ONLY PLEASE!!! SPECIALX 63150 MINING EXPLORATION GENERIC PHOTO FROM HILL TOP MINES IN SOUTH AUSTRALIA. PHOTOS SHOW THE PROCESS ON MINERAL EXPLORATION USING DRILLING MACHINES. KEY WORDS, ENERGY, COPPER, GOLD, MINING, EXPLORE, RESOURSES, UNTAPPED, WEALTH, RAPE OF MOTHER EARTH, ENVIROMENT. EXPLORATION; PHOTO PAUL JONES; 060904; BRW MAGAZINE. SPECIALX 06101700 shoe foot boot dirt ground
MELBOURNE, AUSTRALIA – MAY 10: A general view of housing construction in Armstrong Creek on May 10, 2017 in Melbourne, . The 3217 postcode is one of the highest areas of development for first home buyers in the state. (Photo by Pat Scala/Fairfax Media)Generic housing, suburbs, suburb, property, building, timber frame, trusses, truss, urban sprawl, builder, housing market
It might be hard to get corporates to admit it, but business conditions are actually booming, the best they’ve been for two decades, according to the latest NAB survey.
The bank’s monthly business conditions and confidence survey has been tracking around post-GFC highs for several months, but the October index soared to +21, four times better than the long-term average and the highest since the survey started in 1997.
The NAB economics team says much of the surge came from a surprise improvement in manufacturing conditions while personal services also improved sharply.
The notable – and high-profile – exception is the retail sector, languishing at -3 on a three-month moving average.
Last year’s laggard, mining, is back up in the high teens while the construction industry is the star performer, averaging +21 over the past three months.
The survey’s other leg, business confidence, is not matching conditions. The confidence index was unchanged at +8, only a little above the long-run average.
“The large divergence between business conditions and confidence remains a bit of a puzzle,” the NAB economics team admits.
“Firms with worsening confidence pointed to margin pressures, an uncertain outlook and costs as the cause – the latter consistent with relatively more restrained employment conditions.
“Concerns about the outlook could also have negative implications for hiring and investment intentions, although reads on capex have been quite solid in the survey. However, capacity utilisation rates eased a little in the quarter.”
NAB isn’t getting carried away with the October surge, itself wary of the size of the surge and voicing concern about the outlook for household consumption. It noted potential hurdles from underemployment, an elevated currency and household debt.
Nonetheless, the bank is tipping the economy will be strong enough for the Reserve Bank to lift interest rates by 25 points in both August and November next year.
The NAB survey is taken seriously by the RBA.
The broadening and deepening trend reported over recent months helps explain the level of cautious optimism in speeches by the governor and, more recently, his deputy who cited “a solid upward trajectory in non-mining business investment” on Monday.
What could particularly please the RBA and federal government is that business conditions are looking good across all the states, with the exception of WA. Even there, the three-month average is back to breakeven after being negative for most of the past two years.
NSW is the leader of the pack at +21 on the index, but Victoria and South are close behind, Tasmania is sitting on the n average and Queensland on +12.