NAB Monthly Business Survey – April 2015

• Business confidence was unchanged in April, at relatively subdued levels. Until confidence lifts significantly it is difficult to see a sustained economic recovery developing – to date rate cuts have not appeared to do much and it will be interesting to see what if anything this week’s Federal Budget will do. Interestingly, falls in confidence were confined to a small number of industries (professional services and construction). While less negative than in the past, confidence in mining remain the weakest along with finance/ property/ business.

• Business conditions retraced some – but not all of the gains reported in March. In trend terms, the recent upward trajectory of conditions remains intact and is broadly at levels consistent with average rates of activity over the history of the survey. All components of business conditions (trading, profitability and employment) weakened in April, with employment dipping back into negative territory. Changes in conditions varied considerably across industries in the month, with the recovery in the ‘bellwether’ wholesale industry proving short-lived and dropping back into negative territory. Construction also deteriorated, but remained positive, while mining was less negative in the month. Both the exports and orders index remain soft, while capacity utilisation and capex each eased back.

• Economic forecasts will be updated following the Federal Budget tomorrow, but are unlikely to change much from last month’s. Recent signs of improvement in the economic partials are encouraging but the non mining sector needs to lift more to offset the impact on domestic demand of sharply lower mining investment and the hit to income from commodity prices. Consumers are still cautious. The biggest concern remains the weak intentions towards business investment. The RBA’s rate cut in May was a line-ball decision in our view, but with partials improving and inflation expected to remain relatively subdued, the RBA is likely to remain on hold for some time unless unemployment rises more than expected (forecast to peak at 6.4% in late 2015).

Implications for NAB forecasts:

• Revised domestic forecasts will be released tomorrow in conjunction with NAB Economics coverage of the Federal Budget.

For further details,  refer to attached document.

• Monthly Business Survey – April 2015 (PDF, 187KB)