Australia's March business conditions improved dramatically, coming in at 14 vs 9 last, while confidence stood at 6 vs 7, with NAB noting that business conditions hit their highest level since the GFC in March.
Key Quotes - NAB
Results from the March NAB Monthly Business Survey point to an overall healthy economy that is gaining momentum, at least in the near-term. Business conditions hit their highest level since the GFC in March, although Cyclone Debbie may be behind the smaller representation of Northern Queensland firms in the March sample, potentially overstating the magnitude of the improvement in conditions.
Meanwhile, business confidence outcomes have been perplexing, diverging somewhat from business conditions of late – albeit staying at solid levels – while weak Survey outcomes in retail are still a point of concern.
Business conditions are consistent with NAB’s outlook for economic growth to accelerate in H2 2017, following some likely disruption in Q2 from Cyclone Debbie. However, the longer-term outlook remains less compelling, particularly as major growth drivers (LNG exports, commodity prices and housing construction) begin to fade.
Meanwhile, the RBA has emphasised its financial stability concerns, which are expected to keep them on hold for the foreseeable future.
According to Mr Alan Oster, NAB’s Chief economist, “the bounce in business conditions this month came as a bit of a surprise, especially the big improvement in Queensland in light of the likely disruptions from Cyclone Debbie in late March. One possibility is that ‘Debbie’ is having the unexpected effect of overstating conditions in March given that the cyclone coincided with a lower response rate from firms in Northern Queensland. Even so, conditions have improved almost across the board to levels that suggest a strong economy in the near-term. That includes WA, which has been looking better of late and suggests the worst of the mining downturn may be behind us.”
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