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 recent readings from NAB’s monthly surveys have largely been consistent with those forecasts.
According to NAB’s latest monthly business survey of 400 firms conducted in the last week of October, business conditions continued to bump along at below-average levels. Since late 2018, NAB’s conditions index 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 registered 3, a modest rise from September’s reading of 2.
The latest reading of NAB’s confidence index moved largely in line with its condition index. It improved from September’s reading of 0 to 2 in October, although it is still well below its 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.
ANZ senior economist Catherine Birch said, “While there is still a long way to go before we can consider the private sector in recovery, there were some tentatively positive signs.” However, she also noted “the business sector has not been as responsive to monetary and fiscal stimulus as we would like”, given the capacity utilisation rate was “largely flat”, as was NAB’s employment index.