A measure of Australian business conditions jumped in March to highs not seen since before the global financial crisis with sales, profits and employment all at levels that bode well for a pickup in economic growth in coming months. National Australia Bank’s monthly survey of more than 400 firms showed its index of business conditions climbed 6 points to +14 in March, well above the long-run average of +5. The survey’s measure of business confidence, however, dipped a point to +6 which was in line with its long-run average. The major services sectors and wholesale reported the strongest conditions, while retail continued to suffer. Mining brightened considerably on the back of higher commodity prices.
NAB chief economist, Alan Oster, cautioned that Cyclone Debbie may have flattered the survey by limiting responses from the affected area in northern Queensland. “Even so, conditions have improved almost across the board to levels that suggest a strong economy in the near-term,” said Oster. “That includes Western Australia, which has been looking better of late and suggests the worst of the mining downturn may be behind us.” The economy grew a faster-than-expected 1.1 percent in the fourth quarter of last year, underpinned by strength in consumer and government spending and home building.
That improvement encouraged the Reserve Bank of Australia (RBA) to hold interest rates steady as it kept a wary eye on the risk of overheating housing markets in Sydney and Melbourne. The NAB survey’s measure of sales enjoyed the biggest gain in March, rising 10 points to +22, while profits rose 3 points to +13. The employment index held steady at a relatively firm +5, which implies a healthier labour market than that shown in the official jobs data. Forward orders also added 2 points to +4, suggesting the acceleration in activity may have legs.
The survey’s measure of capacity utilisation edged up to 81.9 percent in March and business speeding intentions rose to a firm +13, pointing to a better investment outlook. There was still little sign of inflationary pressure in the survey, albeit wage growth was firmer in mining. Growth in purchase costs and final product prices was tepid while retail prices actually fell 0.1 percent at a quarterly rate, suggesting some downside risks for consumer price inflation in the first quarter.