The NAB released the November Monthly Business Survey today which showed business conditions and confidence were broadly unchanged in October.
Business conditions have been sluggish resting in negative territory for some time now but there was an ever-so-slight improvement to -3 in November from -4 in October and September. On the confidence front the post election ebb continued with confidence slipping back a little to +5 from 6 in October and a whopping 12 in September.
The question is: where do the expectation (signified in the positive read in confidence) and the reality (in the negative read in conditions) converge?
The NAB doesn’t give any guidance on this question but they note the improvement in trading conditions in mining and manufacturing and increase in capacity utilisation is more than counterbalanced by a big fall in the employment index which they say “fell considerably” from -3 in October to -8 in November.
As a result of this and other indicators the NAB has upgraded the forecast for growth in 2014 and 2015 but also retains at least one, possibly two, interest rate cuts in their outlook. They said:
Australian domestic economy expected to remain weak and growth, while gradually improving, not likely to be jobs-friendly. GDP now forecast at 2.7% (was 2.5%) for 2014 and 3.0% (was 2.9%) for 2015. Critically domestic demand is not expected to significantly exceed 1% over the forecasting period. Unemployment to reach 6½% by late 2014. Rate outlook unchanged with RBA watching economy before another cut in May, although some risk of an earlier or second cut — labour market will be key to watch.
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