Business conditions take positive turn: NAB

Business conditions rose 7 index points in April to an overall reading of -10, according to NAB's monthly business survey

Business conditions take positive turn: NAB
Business conditions take positive turn: NAB

Business conditions rose 7 index points in April to an overall reading of -10, according to the National Australia Bank (NAB) monthly business survey.

The promising report has bolstered views that business conditions could stabilise, indicating the strongest figures since December 2008.

All components of the index have improved Australia-wide, with trading up 7 points to -3 index points, and profits peaking at -10 index points.

NAB Chief Economist Alan Oster says the figures appear positive.

"There is little doubt that the results of the April survey represent the most encouraging set of numbers for some time," he says.

According to the report, business confidence dropped only one point to -14 index points.

This result was driven by better readings in transport and mining, partly offset by falling confidence in wholesaling.

"While it is perhaps unwise to put too much emphasis on one month's results, the April survey does seem to point to a stabilisation of confidence at levels around those reported in late 2008 and early 2009," Oster says.

"That is, at levels significantly above the fear-driven readings of January and February."

Employment conditions continued to vary by sector in April, although all sectors report poor labour market conditions.

Mining reported the weakest labour market conditions, followed by manufacturing, construction, finance/business property services and wholesale.

Transport and storage is now the "best performing sector" at -11 index points, followed by retail.

"While government stimulus packages are no doubt a key driver of the recent jump in activity reported in retail and transportation, at least there are now signs that the falls in demand may be easing," Oster says.

The best overall sub-segment was food retailing (at 20 index points) and remains the only segment to record positive employment outcomes.

"The key message from the survey on employment is that the pace of job loss has slowed rather than a fundamental change in the prospects for rising unemployment," he says.

Employment on the whole has increased 11 points, yet still remains at a very weak -18.

Purchase costs for the first time fell in April (down 0.1 percent) as lower commodity prices finally started to feed into the data.

Exports also showed pleasing results, jumping up 26 points over April to -4 index points.

On the downside, availability of credit shows little change, with 17 percent of respondents reporting tougher credit availability compared with 18 percent last month.

In trend terms, Queensland reported weak conditions overall, falling below the national average.

The NAB business report is based on a survey of around 350 SMEs, and is published on a monthly basis.

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