Business confidence has fallen in October after a string rise in September according to National Australia Bank’s latest survey. The index fell 3 points to +2, reversing the 4 point gain in September. As part of the same survey, NAB also measures business conditions and this index remained steady with last month’s reading of +9.
NAB described business confidence as “somewhat fickle” despite strong business conditions. The index reading of +2 was still “well below” the long run average and the deterioration was reasonably broad based but the bank noted the finance, property, business, manufacturing sectors improved and in the case of the mining sector, was less negative. Westpac interpreted the results as an indication the RBA’s actions earlier in the year were kicking in. “This strengthening of business conditions suggests that lower rates and a lower dollar are having a positive impact.”
UBS said the employment intentions part of the index “are consistent with ongoing solid ~2% jobs growth.” Goldman Sachs was less positive in its view and said, “We retain a far more cautious interpretation of these data and still see the risks as skewed towards the broader recovery falling short of expectations.” NAB said the market’s pricing for another cut in the next six month was overly pessimistic. With the release of the October indices, the bank reiterated its view of rate cuts as being “unlikely” and it expects official rates to be hold. However, it acknowledged how the timing of the first rate rise had been pushed out to 2017.
Domestic bond markets received the data as being positive for growth prospects and pushed the 3 year bond futures yield up 2bps to finish the day at 2.05% while the 10 year bond futures yield closed up 1.5bps at 2.92%.
