Australia: Business survey suggests solid near-term activity, despite easing from multi-year high - NAB

Analysts at NAB note that the previous month’s unexpected surge in Australia’s bBusiness conditions was more than fully unwound in February, although the index remains at levels that point to solid rates of business activity at present.

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“The business conditions index dropped 7 points, to +9 index points in seasonally-adjusted terms, which is still above the long-run average (+5). Business confidence also gave back some ground, but has not quite returned to its December level (falling 3, t0 +7 index points).”

“The February NAB Monthly Business Survey gave back the surprisingly strong gains seen in the previous month although both conditions and confidence remain at above average levels. Some payback was flagged in last month’s Survey, as temporary factors were thought to have been behind much of the spike in both business conditions and confidence. However, despite the pull-back, both of these indicators remain at levels consistent with solid business activity in the near-term, and are higher than through much of H2 2016. There are still some points of concern such as the persistent weakness evident in retail conditions, which warrant close monitoring.”

“Additionally, it is the longer-term growth picture that is more concerning, particularly as the contribution from LNG exports, temporarily higher commodity prices and the residential construction boom fade, putting pressure on the labour market. However, the RBA is increasingly putting emphasis on financial stability concerns, which is likely to impact the response of monetary policy.”