NAB survey paints bleak outlook for economy

Business confidence and conditions have either declined or tracked sideways in the past month, a new survey shows.

NAB’s survey mirrors a weakening in private sector demand. Picture: AAP

Business confidence and conditions have fallen back or tracked sideways in the past month, stabilising at low levels after significantly declining between mid-2018 and 2019.

NAB’s monthly business survey for November has painted a bleak outlook for the Australian economy, with recent fiscal and monetary stimulus getting little economic traction.

Business confidence fell two points to zero index points, unravelling the increase experienced in the previous month AND remaining well below the long-run average of +6 index points.

Conditions remained unchanged at +4 index points, flatlining as a result of below-average movements from trading conditions and profitability, combined with an above average employment index.

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The employment index remained unchanged at +4 index points, trading conditions slipped one point lower to +6 index points and profitability rose three points to +3 index points.

At the industry level, the divergence between weakness in the goods-related industries and the strength in the services sector widened.

The construction and manufacturing sectors have stabilised after previous large falls.

Mining also saw a significant pullback on lower commodity prices. By state, NSW and Tasmania are currently seeing the best conditions, while Queensland is now weakest, according to NAB.

Recent optimism in forward-looking indicators unwound this month following the fall back in the below-average and negative confidence index, indicating on average firms see no change in business conditions going forward.

Forward orders fell to negative two index points, unwinding October increases.

Capacity utilisation and capex edged lower and are both around average, influencing overall confidence to dip back to zero index points.

“The business survey has mirrored the weakening in private sector demand over the past year or so,” NAB group chief economist Alan Oster said.

“So while public sector spending has been a key support to growth over the last year, we are not seeing as many spill-overs as hoped into private sector business confidence – it appears to be more affected by the weak consumer at present.

“Overall, the business survey is consistent with ongoing weakness in GDP growth - especially private demand - and suggests there has been little improvement in Q4 for GDP,” Mr Oster added.

“With conditions below average and confidence also weak, there is a risk that employment growth slows and that investment will remain weak despite spillover demand from public sector spending and a stabilisation in mining.”