Australian business conditions were robust in the first half of 2018 and a cyclical-peak was reached in April of that year. Although they remained well above average for some months, readings began to slip and by the end of 2018, they had dropped to below-average levels. Forecasts of a slowing domestic economy began to emerge in the first half of 2019 and the latest readings from NAB’s survey are unlikely to alter their course.
According to NAB’s latest monthly business survey of 400 firms conducted in the latter part of July, business conditions deteriorated after a brief spike in June. Since late 2018, NAB’s conditions index had bounced between 3, which is on the low side of normal and 7, which is about average. The index then broke through this lower bound in May 2019. The latest reading of 2 is not much lower but it is far from comforting.
While NAB’s condition index fell, the latest reading of the confidence index partially rebounded from June’s figure of 2 to 4 in July, although it is still below the long-term average reading of 6. Typically, NAB’s confidence index leads the conditions index by approximately one month, although some divergences appear from time to time.
NAB chief economist Alan Oster reiterated his message from the previous month. “[T]he business sector has lost significant momentum since early 2018 and…forward-looking indicators do not point to an improvement in the near term.”