The huge jump in the NAB Business survey measure of conditions to 13 last month was the biggest on record. Unfortunately, it was also a furphy.
This month’s report shows conditions fell back to 5. That’s bad news.
Worse however is that business confidence fell 4 points to 1 and it’s increasingly looking like Australian business confidence is on the verge of a collapse from recent strength.
The NAB said that while the bounce in conditions “proved short lived” it was however around “long run average levels”.
The NAB’s summary of the data said:
The fall in conditions was driven by all three components (sales, profits and employment), although the last remains the weakest, pointing to only very modest growth in employment – insufficient to prevent a further rise in the unemployment rate. But while last months spike was relatively broad based, the pull back in November was much more mixed across industries – concentrated in retail, manufacturing and service industries. We are yet to see any clear beneficiaries of the AUD depreciation.
In the end this means with a “softer commodities and labour market outlook” the NAB Economics team has changed their “rate call to two cuts of 25 bp in March and August 2015, then on hold until late 2016.”
The NAB has also downgraded their GDP forecasts “reflecting weaker history and terms of trade: 2014/15 2.5% (was 2.9%); 2015/16 3.0% (was 3.2%). Unemployment rate now to peak at around 6¾% (was 6½%).”
This data shows once again that the Australian economy is weakening.