There is nothing like the continuation of solid business conditions to give business a shot in the arm, and the change in the political narrative has helped too. That’s the key takeout from the NAB Monthly Business Survey, released this morning.
The NAB said business confidence recovered to 4 points to +5 in September from August’s +1. The NAB characterised this recovery as only “partial” highlighting that the recovery in confidence came after “the Government’s leadership uncertainties were resolved.”
But, like McKinsey last week the NAB agreed that financial market ructions are holding back confidence. That is, even though “financial market volatility and emerging market concerns have moderated from the heights of the previous month… market concerns remain elevated.”
On the conditions front business reported a robust +9 which contunues to be well above the post GFC average of just 0.3. Trading and profitability dipped back a little but in good news the NAB said “employment is finally improving, turning positive and increasing to its highest level since mid-2011.”
The really good news for the economy is what it implies for the outlook and the domestic economy as a whole. The NAB said:
Overall, the business survey suggest a good degree of resilience in what appears to be a building non-mining sector recovery. This is particularly apparent in industries thought to be highly responsive to currency changes in the near-term, including personal and business services. Weak commodity prices and falling mining investment will remain a drag on economic activity and downside risks from offshore remain pronounced. However, we find it difficult to mount a case for further policy easing on purely domestic grounds and view market pricing for another 25bp cut over the coming 6 months as overly pessimistic.
Finally the economy might have turned the corner.