Australian business conditions were robust in the first half of 2018 and a cyclical-peak was reached in April. Then readings began to slip, although they remained well above average for some months. However, by the end of 2018, the readings had plunged to below-average levels. The latest NAB business report suggests conditions over the Christmas/New Year period may have been the result of temporary factors.
According to NAB’s latest monthly business survey of 400 firms conducted in the last week of January, business conditions improved back to above-average levels. After four months of consecutive falls, NAB’s conditions index increased from 3 in December to 7 in January. NAB chief economist Alan Oster said, “Some improvement was likely given the difficulty in addressing seasonality around the Christmas/New year period but even after this partial reversal, conditions and forward orders continue to trend lower and still show a sizeable decline over the past six months.”
ANZ senior economist Felicity Emmett agreed. “The small rebound was evident across most component indexes, although in a worrying sign for the labour market capacity utilisation continued to edge lower. Even taking into account the bounce in January, the drop in business conditions suggests a substantial loss of momentum in the economy.”