The NAB’s quarterly business survey is out this morning – it’s the big brother of the monthly survey and has more respondents allowing a deeper dive into the economy.
The survey showed that business confidence (+6) and conditions (+3) are at, or better than, long-run averages but the NAB’s commentary drips with caveats and reasons why the the underlying economy businesses face is not as strong as the headlines suggest.
On conditions – which is what businesses are experiencing now – the NAB said that the increase to 3 from the long run average of 1 should be judged against conditions which, “steadily eased” across the quarter and forward orders which also “eased, indicating limited momentum for domestic demand in the near term.”
“Given the persistent uncertainty facing firms, stemming from factors both domestic and abroad, any expectation for a significant rebound in domestic demand would seem premature. Both consumers and business remain cautious about spending, despite encouragement from very low interest rates, which is unsurprising given slower rates of income growth,” the NAB said in the release accompanying the survey.
Looking forward the outlook is even more pessimistic with business expectations of activity, “in their own business has subsided a little – three and twelve month expectations have flattened out.” The NAB said this was consistent with “easing confidence levels since the start of the year,” while the dip in forward orders implied “only a moderate improvement in near-term demand.”
There is some good news though with the NAB highlighting that “business investment growth may lift notably in the next 12 months.”
As a result of this survey the NAB said that domestic demand, which is necessary for the economy to successfully make the economic transition from the mining investment boom, is likely to “hold steady at previous (subdued) levels.”