NAB has its monthly business survey out today and there’s more evidence that Australia’s economy is at a critical point in terms of activity and outlook. Here’s the headline chart, showing business conditions down to their worst level since May 2009:
(Black is the seasonally adjusted outcome and red is the trend, while the green straight and dotted lines reflect conditions in the 90’s recession and the GFC respectively.)
From the note:
All of this weakness has come about despite relatively easy monetary policy settings and the recent depreciation of the Australian dollar, which should be helping to improve Australia’s competitiveness. While industry activity readings were heavily skewed to the downside, conditions in finance / business / property bucked the trend, lifting to their highest level in two years. Overall, the outlook for near-term activity remains worrisome, with forward orders, stocks, employment conditions and capacity utilisation all remaining well below historical average levels.
Emphasis added above. There’s some silver lining here with activity in some sectors such as finance and property ticking up – much needed with other key sectors, as the report goes on to point out, being gloomier than Melbourne’s inner-northern suburbs last night.
Then there’s business confidence, which is up one point and sitting precisely at zero – implying the number of optimistic and pessimistic firms is roughly equal. With confidence feeding directly into investment planning this is a precarious position.
In the critical sectors of retail, mining, and manufacturing, the numbers are a horror show:
Business conditions deteriorated markedly in retail (down 17 to -28 points), mining (down 15 to -28 points) and manufacturing (down 13 to -27 points). The slump in retail activity is consistent with very poor forward orders in the previous month; while June is traditionally a seasonally strong month for retailers, this year’s mid-year sales appear to have been underwhelming. While manufacturing conditions were very poor, confidence in this industry improved in June, which may reflect the expectation for a lower exchange rate to eventually strengthen international demand for Australian manufacturing exports and alleviate pressure from imports.
The full report is here. Rate cut, anyone?
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