Transport drags chain as business confidence rises

Market conditions and capacity utilisation particularly poor but NAB says revival in activity foreseen in longer term

Transport drags chain as business confidence rises
Transport drags chain as business confidence rises
September 10, 2013

Australian business sentiment last month was on the rise in anticipation of a Coalition election victory, according to a major bank’s survey.

However, the survey also makes fairly grim reading for the 'transport' sector, even given its curious pairing with ‘utilities’.

The monthly overview of business confidence compiled by NAB Group Economics states the change appears due to "expectations of political change and more certainty about future political frameworks" that had taken hold.

"Business confidence strengthened considerably in August, with the index rising to its highest level since May 2011," NAB researchers say.

But they also introduced a note of caution.

Confidence is now "only back to average levels and much will depend on whether the current bounce is maintained or erodes away in the face of poor business conditions", they say.

The researchers added that conditions were especially weak in mining, manufacturing, construction and wholesale, while recreation and personal services was the only sector to report positive conditions.

"Conditions also weakened considerably in transport and utilities, wholesale and to a lesser extent retail."

Forward indicators edged up a touch but remain at subdued levels.

"Particularly concerning was a slump in employment conditions (weakest since May 2009), painting a worrying outlook for the labour market," the researchers say.

"Capacity utilisation remained subdued."

Indeed, though capacity utilisation rose marginally overall, led by mining, manufacturing and construction, these gains were "almost entirely offset by declines in transport and utilities".

Meanwhile, against the wider trend, labour costs growth was strongest in transport and utilities, with a 1 per cent rate for the quarter.

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