Business hasn’t reacted to the RBA’s February rate cut, according to the NAB’s February Business Survey. The survey shows business confidence fell 3 points over the month to zero.
Coming the same morning that consumer confidence fell to a three-month low, this is really bad news for the economy right now and over the next 12 months.
The NAB said:
The index is now at its lowest level since before the Federal election in 2013 and is well below the long run average. The fall was relatively broad based, suggesting common factors such as political and economic uncertainty, are driving this result. Mining and retail reported the largest decline, while manufacturing and wholesale were the only industries to report a rise in confidence (although both remain soft).
On the conditions front, the survey showed they remained at 2 points in February with, “each of the components (trading, profit, employment) holding broadly steady – the employment index improved only marginally”.
That means the below-trend rate of growth is likely to continue, the NAB says.
What’s clear in the NAB’s commentary is that chief economist Alan Oster is getting worried about the outlook for the economy. For the moment, his forecasts remain unchanged but he did note:
The domestic economy, in early 2015, has not gained momentum and indeed business confidence is lower. Inflation will continue to slow. We still see another rate cut in coming months – most likely May but the April meeting is live and data-dependent. We are not forecasting a second cut to below 2% but the chances of that happening are rising (35-40% chance) as unemployment increases.
As the Q4 GDP showed, housing and consumers can’t do all the heavy lifting in the economy to get it back to trend growth. Rate cuts alone won’t get business investing either, so it is now incumbent on the Federal and State governments to provide the preconditions to improve business confidence, get them increasing employment and see them invest.