Australian business conditions were robust in the first half of 2018, especially so in April when one index registered an all-time high. Readings then slipped back but they were still well above average. Businesses reported some further slippage in the November survey but the figures were still on the positive side of the normal range. However, the latest report now marks a dramatic change.
According to NAB’s latest monthly business survey of 400 firms conducted in the second week of January, business conditions have fallen back sharply to below-average levels after four months of consecutive falls. After revisions, the index fell from 11 in November to 2 in early-January. NAB chief economist Alan Oster said, “Business conditions fell sharply in December and, while caution should be taken when interpreting data around the Christmas/New Year period, this outcome continues the downward trend in conditions over the second half of 2018.”
Westpac senior economist Andrew Hanlan agreed with his NAB colleague regarding the interpretation of Christmas-period data. However, he is also open to the idea the numbers may indeed be legitimate when he posed the question “is the December update a ‘false read’ or a watershed moment?” If it is a false read then the next report will produce a bounce of some sort. If not, then this latest report and “the fall in business conditions over the second half of 2018 suggests a significant slowing in the economy.”
