Elevated business conditions & confidence point to a robust business sector in Australia at present, according to analysts at NAB as the the business conditions index jumped 6pts to a strong +19 index points, which is well above the long-run average of +5 index points.
Key Quotes
“According to Alan Oster, NAB Group Chief Economist “The large rise in the NAB Monthly Business Survey business conditions index provides further confirmation of robust business activity in Australia. While the index can bounce around from month-to-month due to changes in seasonal patterns, conditions remain elevated on a trend basis.”
“The business confidence index also rose by 2pts to +12 index points, its highest level since April 2017. According to Mr Oster “The rise in confidence may reflect the improved global economic backdrop, but it is important to note that the survey was conducted before the current turbulence in international financial markets”
“Leading indicators in the survey are generally positive. “While forward orders have eased a little they remain above average and capacity utilisation has been trending up which is a good sign for both future investment and employment” Mr Oster said.”
“By component, both trading conditions (sales) and profitability posted strong gains while employment conditions were unchanged. “The employment index remains consistent with a solid rate of job creation of approximately 20K per month, which is less rapid than the current trend rate of 25K per month, but should be enough to put further downward pressure on the unemployment rate over the first half of the year”, said Mr Oster.”
“Business conditions are solid to strong across all major industry groups with the exception of retail. The construction industry in particular is performing well. “The improvement in construction conditions over the last twelve months is due to improved trading conditions, profitability and employment, and probably reflects the still elevated residential construction pipeline, infrastructure construction and the gains in non-residential building approvals last year. The lift in employment is particularly significant given the rising share of employment found within the construction industry.”
“On a less positive note, the slippage in conditions in recreation & personal services to the lowest level in three years bears close watching and, together with the ongoing weakness in retail conditions, points to continued softness in consumer activity” said Mr Oster.”
“The Survey results for January are broadly in line with our view of the Australian economy. We are hopeful that Australia will see stronger economic growth in coming quarters, due to the strength in the labour market, business activity and infrastructure spending, despite the challenge of only modest consumption growth and the peaking in LNG exports and housing construction. This would probably prompt the RBA to consider a gradual removal of emergency policy stimulus, as long as there are signs of wages strengthening. We still expect the first RBA hike to come in the second half of this year if unemployment falls further and wages show improvement, although the risk is that the RBA will move later as it has indicated that it is in no rush to lift rates” said Mr Oster.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.