The widely watched NAB business confidence index has recorded an unchanged result for the September quarter.
Business confidence for the quarter was +6, the same as for the June quarter. This is slightly above the long-term average levels of +5.
But “the monthly index shows that confidence eroded over the course of the quarter”, according to NAB.
“Given the persistent uncertainty facing firms, stemming from factors both domestic and abroad, any expectation for a significant rebound in domestic demand would seem premature,” it said. “Both consumers and business remain cautious about spending, despite encouragement from very low interest rates, which is unsurprising given slower rates of income growth.”
The NAB report described business conditions as “soft”, with the confidence index jumping from +1 to +3. Unfortunately, this improvement seems to be temporary, according to NAB.
“The monthly survey showed that much of the improvement came from a surprising and narrowly based jump in conditions during July,” NAB said. “Conditions steadily eased over the remainder of the quarter. Consistent with this, forward orders eased, indicating limited momentum for domestic demand in the near term.”
Among business sectors, recreation, personal services, finance, property and business services reported the most positive business conditions, while mining continued to be weak.
The recent depreciation in the Australian dollar occurred after the survey period, so it is not reflected in firms’ responses to the impact of the dollar. However, the fall in the dollar is a “positive note” for confidence, said the report, as is the surging property market.
The decline in the dollar “will help Australian export competitiveness, although with the drawback of higher cost pressures”.
Residential construction “remains a relatively bright spot that should have flow-on effects to the rest of the economy.”
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