Contrary to what many expected the release of the latest NAB business survey has shown an improvement in both business conditions, which rose from 8 to 12, and business confidence which came in at 6 from last month’s print of three.
The NAB was very upbeat on the findings:
The latest Survey provides strong evidence that the Australian business environment has not only weathered global uncertainties, but appears to have strengthened. There are also signs that the non-mining recovery is becoming a little more broad-based.
The excellent news given recent data, such as February’s flat retail sales, the recent dip in the Dun and Bradstreet Business Expectations survey, and weekly consumer confidence all pointed to a weakening economy.
Business conditions hit their “equal highest” level since 2008 and are now 7 points above the long run average of +5.
NAB chief economist Alan Oster said: “The lift in business conditions to these levels not only suggests that Australia is withstanding the uncertainty offshore, but that the recovery in the non-mining sectors of the economy have in fact stepped up a gear this month”.
Oster also said “the lift in business confidence suggests lower risks of contagion from global uncertainty, but also provides some assurance that gains in conditions will be sustainable”.
That’s good news for the economy in the quarters ahead, particularly as it faces the potential complication of the stronger Aussie dollar which is now back above 76 cents in the wake of the data.
Of particular note was that the employment index, +5 up from +1 last month, points to a strong counter-balance to declining consumer confidence as a result of political and global market uncertainty.
“It is particularly encouraging to see the employment index point towards ongoing strength in the labour market, supported by signs the recovery is broadening into previous trouble spots such as manufacturing,” Oster said.
The survey also reported a fall in business spare capacity which the NAB said combined with “good profitability and improving confidence levels all raise the prospects for a ramping up of business spending and employment ahead”.
It’s hard to recall a more upbeat read on a NAB business survey and Oster said even though the RBA has left the door ajar for another easing in monetary policy “there is no evidence” that such a move will be required at the moment.