Australia - NAB Business Conditions: 6 (prior 8) and Confidence 4 (prior 6)

National Australia Bank business survey for October

Business conditions index fell 2 points, to +6

• slightly above the long run average of +5

Business confidence has proven to be relatively resilient this year, but did moderate in October,

• fell 2 points to +4 index points


• below the long-run average of +6)
  

Key points from NAB:

• Survey is now suggesting some moderation in the non-mining economic recovery


• Aggregate level of business conditions (a combination of trading, profitability and employment conditions) dropping in October - the trend has also steadily eased from its most recent peak in May


• Despite the subdued trend, business conditions remain at above average levels and business confidence has been tracking broadly sideways for some time - albeit easing in the month as well


• A noticeable improvement in retail conditions was encouraging, although the trend remains quite soft


• Both trading and employment conditions deteriorated- although the former remains elevated


• Profitability was steady


• Inflation measures in the Survey have been subdued and generally moderated further in the month

More:

• Other leading indicators were not encouraging either, with forward orders falling significantly, while capacity utilisation - of relevance to future employment and capital spending - eased further

The recent moderation in some NAB Business Survey indicators is a concerning trend that warrants close monitoring, but our assessment is that the deterioration to date is not (yet) enough to warrant a significant change in the outlook

• However, if the recent trends were to continue, it would be unsettling and imply that the non-mining recovery has started to run out of steam earlier than expected


• Subdued retail conditions are an additional concern


• For now though, we would only be looking to slightly lower 2017 forecasts and remain reasonably comfortable with the near-term outlook - which is expected to be supported by commodity exports and the housing construction cycle


• That said we are clearly more concerned than the RBA about the near term outlook


• Beyond the near-term, impetus from those growth drivers will fade which will see the economy slow into 2018


• Two more 25bp rate cuts are still expected from the RBA next year in response to ongoing low inflation and a more subdued growth outlook.

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NAB"s monthly business survey covers more than 500 firms

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AUD is little changed on this report. Its not a great report, and its not terrible. The recent decline in the survey results over the past few months is, for me, a concern though. I think NAB are correct to warn of the potential for further rate cuts should the data deteriorate further, and in response to low inflation. Something to be aware of.

Australia - NAB Business Conditions: 6 (prior 8) and Confidence 4 (prior 6)
Australia - NAB Business Conditions: 6 (prior 8) and Confidence 4 (prior 6)
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