Australian businesses are apparently more confident about the future although they are less happy about the current trading environment. According to NAB’s latest monthly business survey of over 510 firms across the non-farm business sector in the last week of November, the Business Confidence Index rose 1 points to 5 while the Business Conditions Index fell back 2 points to 5 from its revised October value of 7. To put this in a longer-term context, the average for business confidence is 5 while the average for business conditions is 6.
On the day, reactions in financial markets indicated the figures were interpreted as vaguely negative for the economy. Although probabilities of RBA rate changes barely changed in the cash markets, bond yields fell with both 3 year and 10 year bond yields falling 3bps to 1.94% and 2.80% respectively.
Andrew Hanlan, senior economist at Westpac said, “The Australian economy clearly lost momentum in 2016, with official data reporting that output contracted in the September quarter. A key question, are conditions beginning to recover from this soft patch, boosted by recent RBA rate cuts and post the Federal election? On this, there are mixed signals. The NAB survey reports conditions continue to moderate. The AiG surveys reveal a rebound across the three months to November, up from the low of August, consistent with official retail sales.”