Business conditions stabilise but employment decline a worry: NAB

Business confidence and conditions have stabilised despite the bushfires but jobs are a warning sign for the economy, says NAB.

There are green shoots in bushfire ravaged forests, but in economic terms, growth is limited. Picture: AAP

Business confidence and conditions stabilised in January despite the bushfire crisis but employment conditions weakened significantly, according to NAB’s monthly business survey.

The survey showed business confidence improved one point to a net balance of minus one point, while business conditions remained at three points.

Both remain well below their long-run averages.

Despite three interest rate cuts from the Reserve Bank and fiscal stimulus from the federal government, Australian business confidence and conditions are yet to show any sign of improvement after tumbling below their long-run averages last April.

NAB chief economist Alan Oster, said that despite signs at the state and industry levels of a bushfire impact, the overall the hit to business conditions and confidence “has not yet been as large as we feared”.

But while there’s been no significant deterioration in overall terms the survey continues to suggest “very little to no growth in the private sector”.

Moreover, there some fresh warning signs for the economy.

Employment conditions fell to one point from four points in the month.

Forward orders remained at minus one point, while capacity utilisation crept up to 81.3 from 80.9.

“Looking forward, businesses themselves do not anticipate a material improvement with forward orders still weak and negative and capacity utilisation having fluctuated around its average in recent months,” Mr Oster said.

“Of note this month is the decline in the employment index - which had previously held up - and at one point now is just below average and implies employment growth of around 16,000 per month, somewhat slower than recent labour market outcomes.”

“Businesses continue to tell us that they don’t see an imminent recovery,” he said.

“Leading indicators are stable but certainly not improving.”

He said the concern this month was the decline in employment.

“It is now below average and a worry given the labour market has been a bright spot in the economic data,” he said. “That said, there is a risk that ongoing weakness in business activity sees a pullback in hiring intentions.”

The survey showed evidence of an “only moderate” impact of the bushfires with conditions lower in NSW and Victoria as well as recreational and personal services in the month.

Meanwhile the services sector remained the “standout” across industries, while retail and wholesale were “still fairly sick”.

Mr Oster said that was not an entirely surprising result, with recent anecdotes of ongoing malaise in the sector and continued weakness in consumer data.