Business outlook more uncertain: NAB survey

Business conditions softened sharply in the final months of 2018, with plans for new investment slowing.

A pedestrian walks past a store in Pitt Street Mall in Sydney. Picture: AAP

Australian business conditions weakened sharply in the final months of 2018, with plans for new investment slowing amid signs that hiring is also set to cool off as the year progresses.

The National Australia Bank’s business conditions index stood at +8 in the fourth quarter, down from +13 in the third and +16 in the second quarter.

The business confidence index stood at +1 in the fourth quarter, down from +3 in the third quarter and +7 in the second quarter.

Forward looking indicators also point to potential further weakness, said Alan Oster, chief economist at NAB.

Businesses’ own expectations for conditions and employment over the next 3 and 12 months suggest a further pullback, he said. Business confidence has now tracked below average for half a year.

The weak report comes a day after the Reserve Bank of Australia abandoned a bias to raise interest rates for a “more balanced” outlook.

Recent economic data has been soft with retail sales and permits for new apartment construction falling sharply, while the global picture has also darkened with China’s growth slowing.

The RBA has said it would fix its focus on the job market, with any evidence of a rise in unemployment likely to push it closer to cutting interest rates.

“For now things are still reasonably positive (in the job market) but we do see some growing risk,” Mr. Oster said.

Dow Jones Newswires