Quarterly Business Survey – September 2014

Recreation & personal services and finance/ property/ business services reported the most positive business conditions. Interest rate sensitive sectors performing well.


Business confidence was unchanged in Q3, remaining close to the long run average levels. However, our monthly survey shows that the momentum has turned, with confidence easing steadily over the quarter. Similarly, conditions were up marginally in the quarter due to a surprisingly strong July result, but eased over the following two months. There was a slight lift in 12 month expectations.

  • Sentiment was mixed across the states and industries, but we continue to see interest rate sensitive sectors, particularly construction, performing well due to low interest rates and strong investor demand (including foreign investors). Service industries remain relatively positive as well.
  • The recent large depreciation in the AUD occurred after the survey period, so is not reflected in firms’ responses to questions on AUD impacts. When responding, import competing and trade exposed sectors still considered the currency to be at unfavourable levels. Mining and retail reported the largest deterioration, although these firms are also among the most uncertain over what strategies to use to mitigate currency risks. (See our special survey question.)
  • Outside of the services and construction sector, business conditions remain soft in levels terms. Recreation & personal services and finance/ property/ business services report the most positive business conditions, while mining continues to be very weak.
  • Forward orders eased, suggesting sluggish domestic demand to continue in the near term. This is consistent with average rates of capacity utilisation, but suggests a lack of urgency for firms to invest – much stronger non-mining investment will be needed to achieve trend growth in domestic demand. Nevertheless, business investment intentions (next 12 months) rose slightly in the September quarter to be at above average levels. The most recent ABS Capital Expenditure Survey also suggests an increase in non-mining investment, but not enough to offset the coming ‘cliff’ in mining investment.
  • Product price inflation remained subdued in the quarter – an annualised rate of 0.6% (0.2% in the quarter), reflecting softer purchase cost growth and subdued (albeit slightly higher) growth in labour costs. Retail prices lifted modestly.

Implications for NAB forecasts

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