Below trend growth to continue
Confidence and conditions pull back but remain resilient.
We have released the NAB Quarterly Business Survey early given the interest in up-to-date data on prices and constraints on output at present – as well as the importance of understanding the impact of the war in Europe which commenced after the February Monthly Business Survey.
Both confidence (down 5pts to +14 index points) and conditions (down 5pts to +9 index points) pulled back from the rebound levels in Q4 but both remain above average. The decline in both confidence and conditions was relatively broad-based across industries and states.
According to Alan Oster, NAB Group Chief Economist, “Both confidence and conditions have held up relatively well considering the omicron disruptions to activity early in Q1 and the unfolding events in Europe”.
“While confidence has pulled back in a quarterly sense, there was little difference in confidence from the first half of the sample which was surveyed before the escalation in Ukraine, and the second half of the sample following the invasion.”
Forward looking indicators remain healthy after edging lower. In addition to above average confidence and high rates of capacity utilisation, expectations for employment and capex over the next 12 months remain very high.
“Encouragingly, the economy has rebounded very quickly from the Delta lockdowns, and while Omicron has caused some disruption, the forward indicators suggest activity will remain strong over the next year. Capex intentions are particularly strong – and this will be important if business investment is to rise from its current lows and allow business to continue to expand employment and see stronger productivity benefits.”
The prices and constraints questions continue to reflect the impact of supply chain disruptions and higher commodity prices as well as the tightening in the labour market. The share of firms reporting difficulty finding suitable labour edged lower but remains high at 84%. The share of firms reporting availability of materials as a constraint edged slightly higher to 48%, also a very high level for this question. In line with this, price pressures remain evident in the survey, with growth of both input and output prices edging higher in the quarter from already elevated levels.
“The additional detail in the survey points to the continued impact of supply chain disruptions and a tighter labour market. The constraints data do not point to any easing yet on the input side – and this is particularly evident in manufacturing and construction, but materials and labour appear to still be significant constraints in most industries.”
“Accordingly, price pressures remain elevated. The pickup in in the quarter was modest for input and output prices but these were already tracking at survey highs. The retail sector saw a larger increase in price growth – suggesting we may well see another solid CPI print for Q1 when the data is released in late April.”
“Overall, the survey continues to paint an optimistic picture on growth – including the potential for a pickup in business investment. This comes despite global events and still some disruption from the virus. That said, the challenges for both business and policy makers remain clear with price pressures continuing to build.”
For more information, please see the NAB Quarterly Business Survey (March 2022)
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