NAB business survey Q3: Confidence softened considerably

FXStreet (Bali) - National Australia Bank's Business Confidence (QoQ) dipped from previous 4 to 0 in the September quarter, although the bank notes this is largely a reflection of the timing of the survey.

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The NAB Quarterly Business Survey provides valuable insight into Australian business, and is the longest running survey of its type in the country (over 25 years). This Survey offers a more in-depth probe into the conditions facing Australian business than the usual monthly survey, and also provides an indication of how firms perceive the outlook for their respective industries.

The September quarter NAB Business Survey confirms the trend improvement current condition in the non-mining economy, while the outlook is also looking notably better. In contrast, confidence softened considerably although this is largely a reflection of the timing of the survey – prior to the Liberal Party leadership resolution, and at a time when emerging market concerns were particularly high.

Lower interest rates and AUD depreciation appear to be having the desired effects, although this varies by industry. Interestingly, firms indicate that they are facing some challenges when it comes to currency movements, although this largely reflects negative impacts on the wholesale, retail and transport sectors – industries where firms tend to have a heavy reliance on imports. In contrast, areas such as personal services and mining are reporting a much more positive impact.

Leading indicators were generally more positive in Q3 2015. Forward orders jumped to their highest level since late 2009, while expectations for conditions in 3 and 12 months time both improved. A lift in capacity utilisation and capex plans for the next 12 months is encouraging, although firms continue to suggest they require high ‘hurdle rates’ of return before committing to investment.

Product price inflation remained relatively subdued at an annualised rate of 0.7% (0.2% in the quarter), reflecting both softer labour cost growth and modest purchase cost inflation, as well as a degree of margin compression.
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