The NAB Business survey is out and it has confirmed the pick up in Australian business confidence and conditions we have seen in the AiG survey this month.
Confidence has surged to its highest level in 3 and a half years as “Animal spirits lift again” taking confidence to +12 from +4 in August and 17 points above the recent trough in July this year of -5.
What a difference a recovery in Asia and a new Government make.
But the NAB noted however that conditions — what is actually happening now — as opposed to expectations of the future, remains in negative territory and has only improved modestly to -4 from -7 in August. NAB noted conditions in finance/business and property were the strongest but that “Activity remained worryingly weak in mining and manufacturing, while conditions in transport & utilities have recently turned down to very poor levels.”
But added that there was, “Some hope for better activity to come, with orders, stocks and capacity utilisation rising to fresh highs for the year. Nonetheless, employment conditions remain subdued, painting a soft outlook for the labour market.”
For an economy in transition this is a less bad outlook than we have seen for some times as the confidence number suggests. But embedded in this release is the sobering news that even though things are improving the survey only implies underlying demand of of around 2.5-3.0% in Q3 and GDP growth of around 2.5%.
The good news is that business is getting more confident but we’ll need to see more demand before they start hiring again which is what the economy really needs now.
As a result the NAB is still calling for an RBA rate cut but in February next year, not November 2013 as was previously the case.
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