Bank’s business survey shows conditions and outlook mostly on slide
While transport appears to be holding up as it entered the new year, the National Australia Bank’s (NAB’s) Quarterly Business Survey for December shows that is not the whole story and that few other sectors are.
The report reveals tensions and torsions through the economy generally are reflected in the broad ‘transport & utilities’ sector that NAB chooses to measure, particularly wage pressures.
“Business conditions (an average of trading conditions/sales, profitability and employment) decreased by 5pts to +8, continuing the easing trend seen through 2018,” the report finds.
“The decline was driven by a fall across each of the components.
“Conditions declined across all states in Q4, and are lowest in WA. Conditions in Vic remain highest.
“Conditions deteriorated in most industries except wholesale and transport & utilities.
“Retail was also unchanged but is the only industry to currently report negative conditions.”
That said, the business conditions line in transport & utilities was static for the quarter, after coming off a spike in confidence that reached 30 points in last year’s first quarter.
It has now returned the same level as in early 2016 after growing steadily before the spike hit 13 months ago.
Despite the strong recent showing and the outlook elsewhere in the economy, the view of the sector’s wages performance is conservative.
“Over the past 6 months, the expectations of wage pressures have increased across all industries except retail and transport,” the report says.
“The industries reporting the greatest expectations for building wage pressures are mining and construction, which has increased notably over the past three surveys.
Transport & utilities continues to sit at the mid-range of surveyed average hours of work chart, at around 41 per week, with the mining and the construction sectors at between 42 and 44 hours.
NAB’s findings echo a Sensis survey earlier this month. Read about it, here
Economy-wide, the report sees softer conditions expected while still remaining positive.
“Business conditions continued to ease in Q4 and while they remain above average, forward looking indicators point to potential further weakness,” NAB Group chief economist Alan Oster, one of the report’s authors, says.
“Forward orders have declined to below average levels, and while capacity utilisation remains high, firm’s expectations for capex over this year have declined. Businesses’ own expectations for conditions and employment over the next 3 and 12 months also suggest a further pull-back.
“In addition, business confidence has now tracked below average for half a year.” “Over the year, the easing in conditions has been broad-based across most industries.
“Of particular note has been the weakness in retail, which continues to report deteriorating conditions.
“Our survey is from the business perspective, but this trend is in line with other consumer side indicators such as retail sales and consumer confidence in the December quarter.
“Conditions weakened further late in the quarter, with the December monthly survey showing a sharp fall to +2 (and below average) in the month.
“While interpreting data around the Christmas/New year period can be difficult, this outcome suggests the trend towards a loss in momentum has continued. We will look to the next monthly survey to assess just how far conditions have fallen.”
The full report can be read here.