Business conditions weaken despite economic growth, according to NAB survey

THE GDP might be rising but high unemployment has led to a fall in business conditions, according to NAB’s latest business survey.

NAB group chief economist Alan Oster said the sharp fall in business conditions reflects

THE improvement in business conditions seems to have been short-lived as employment lags behind better economic growth.

The National Australia Bank (NAB) business survey, released on Tuesday, shows that its business conditions index fell five points to zero in February.

Its business confidence index fell two points to plus seven. NAB group chief economist Alan Oster said the sharp fall in business conditions reflects the jobless nature of Australia's economic recovery.

“Confidence softened but still remains marginally above trend,” he said.

“Sales and employment (indexes) fell markedly during the month, with the latter pointing to very weak labour market conditions. “Both trading and profitability remain positive, while employment conditions are very weak, pointing to ongoing deterioration of the labour market.” In January, the unemployment rate rose to a 10-and-a-half-year high of six per cent. Mr Oster said he expects it to rise to 6.5 per cent late this year.

He said the fall in business conditions was mainly driven by the manufacturing industry.

“As expected, the sharp turnaround in manufacturing conditions recorded last month was largely unwound,” he said.

“Near-term indicators suggest little improvement over coming months, with forward orders softening, while firms have resumed de-stocking.” Mr Oster said he expects the Reserve Bank of Australia to make one more interest rate cut this cycle, most likely in November. The NAB survey was conducted between February 24 and February 28, covering 600 companies in the non-farm business sector.