Over the last few months, the adjectives used by NAB economists to describe business conditions have strengthened from “solid” to “elevated” and then last month to “record high”. According to NAB’s latest monthly business survey of 400 firms conducted in the last week of March, its Business Conditions Index fell back from a revised reading of 20 to 14.
Typically, NAB’s confidence index leads the conditions index by approximately one month, although in recent months the two surveys have diverged and the condition index has led the confidence index higher in trend terms since late 2014. The latest figures have not changed this situation. The confidence index slipped from 9 in February to 7 in March, a figure which is just above the long term average reading of 6.
ANZ senior economist Jo Masters said further employment growth could be expected, despite lower readings. “The forward-looking indicators of the labour market softened, particularly firms’ profitability, but broadly remain consistent with ongoing jobs growth. Confidence also retreated, which is not surprising given increasing global trade tensions and associated financial market volatility.”
Westpac senior economist Andrew Hanlon agreed. “The survey suggests that the employment conditions index is consistent with jobs growth of around 21k per month. Such a pace would place downward pressure on the unemployment rate decline – unless the participation rate moved higher, a trend which has been evident of late as individuals respond to the improved labour market conditions.”