Business outlook remains mixed: NAB

Marty Silk
(Australian Associated Press)

 

Business conditions strongly rebounded last month but the recovery might not be sustained and other indicators are patchy, National Australia Bank says.

NAB’s monthly index of business conditions leapt to a level of 11 in December, well above the level of zero separating growth from contraction.

NAB chief economist Alan Oster said the rebound in business conditions was encouraging but warned against reading too much into the result.

“Stronger business conditions in December largely reflected unexpectedly strong improvements in some industries, which might not be sustained, while other indicators were generally mixed as well,” Mr Oster said.

He said the rise in conditions was mostly driven by the wholesale, transport and utility industries, while conditions in manufacturing and retail declined.

Mr Oster also said the employment index remained subdued, which suggested not enough jobs were being created to bring down the unemployment rate.

While business conditions lifted, the NAB index of business confidence was flat at a level of plus six in December, indicating businesses were uncertain about the global outlook.

While the headline survey results suggested upside risk to the outlook, Mr Oster said the mixed results below the surface suggested a degree of caution was warranted.

“Importantly, we are not seeing any real signs of a convincing recovery in non-mining investment in the survey, which is crucial to both near-term and longer-term growth prospects,” Mr Oster said.

“Two more 25 basis point rate cuts are still expected from the RBA this year in response to ongoing low inflation and a more subdued growth outlook.”

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