Business

Business conditions at record high despite sluggish economy

9542454 16x9 700x394 - Business conditions at record high despite sluggish economy

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Updated

March 13, 2018 13:07:18

Australia’s economy may well be muddling along at well-below-average pace, but don’t tell business — it says it is thriving.

Key points:

  • Business conditions now at the highest point since NAB started its survey in 1997
  • Construction remains strongest sector, while retail continues to struggle
  • Employment and forward orders conditions point to momentum being maintained

The nation’s most respected and broadest business survey published by the NAB found business conditions hit a new record high in February.

Higher sales, profitability and employment conditions drove the survey index up 17 per cent to 21 points, the loftiest point since the survey started in March 1997.

Conditions continued to climb despite the economy only growing at 2.4 per cent last year, with fourth-quarter GDP results being dragged down by weak business investment and net exports.

However, NAB chief economist Alan Oster said the survey showed business activity was robust.

“Moreover, the strength in conditions is broad-based across industry groups,” Mr Oster said.

Confidence was one area where business was a bit wobbly.

“The fall in confidence may reflect the turbulence seen in international financial markets in early February, but confidence remains above average, suggesting that the impact was relatively limited,” Mr Oster said.

The key themes followed a familiar pattern where conditions were strongest in construction, mining, finance and business services, while retail continued to underperform despite a modest pick-up over the month.

Jobs growth likely to continue

Mr Oster noted the gap between the best and the softest performing industries was at a relatively low level, with even the underperforming retail sector recording its highest reading in eight months.

He said the other key takeaways were the strength in employment and leading indicators, such as forward orders.

“If the surge in the employment index is maintained you would expect to see jobs growth of around 27,000 per month,” he said.

“While this is below the average monthly growth rate in jobs recorded by the ABS over the last 12 months, the bottom line is that strong jobs growth will not be ending anytime soon, which is good news for getting the unemployment rate down.”

He said the data pointed to a pick-up in momentum from recent patchy economic data.

“After last week’s release of below-expectation GDP growth data, the strength in business conditions and leading indicators makes us more confident that Australia will see stronger economic growth in coming quarters on the back of LNG exports, and business and government investment,” Mr Oster said.

“This will sustain strong jobs growth, reduce unemployment, and put gradual upwards pressure on private-sector wages.”

The NAB still has one interest rate rise from the RBA pencilled in for later this year, but says the risk is tilted to a delay into 2019 if the data flow sours.

Topics:

business-economics-and-finance,

industry,

retail,

building-and-construction,

australia

First posted

March 13, 2018 12:56:15

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