According to the Nab Monthly Business Survey for August, the “Business conditions point to a further improvement in the non-mining economy, even as jitters in financial markets weigh on confidence" however "Confidence pared back further in August"
After losing ground last month, the conditions index jumped 5 points to +11, its highest level since late 2009. Looking at each component, trading conditions and profitability recorded significant improvement, however the employment index remains at very subdued levels. “This outcome adds to the mounting evidence that the AUD depreciation and record low interest rates are having the desired effect and helping to offset the weakness in mining.” When looking more specifically at the sectors, NAB reported that the Services sector continues to perform well and the retail sector has improved significantly. The leading wholesale industry remains weak but is likely due to the AUD falling as other leading indicators have improved.
NAB’s survey reported that confidence has dropped further in August from +4 to +1, unwinding the post budget gains and hitting its lowest level since mid-2013. Whilst business confidence and conditions are usually in line, the recent financial market volatility and the slowing Chinese economy have adversely affected business confidence, however not enough to send it into negative territory. Most industries experienced a decline in confidence, however mining and construction recovered some of last month’s sharp declines.
Q2 GDP showed that the Australian economy is growing at 2.0 per cent year on year as it struggles to transitions to non-mining sectors. With that in mind and global growth remaining below trend, NAB’s “2015/16 GDP forecast is now 2.4% while the 2016/2017 forecast is unchanged at 3.1 per cent.’ NAB also forecasts that “the unemployment rate eases to 6% through 2015/16 and to 5.75% in 2016/17.”
NAB believes that the concerns surrounding financial market volatility and slowing growth in China, will be somewhat offset “by stronger local momentum in the non-mining sector.”
Author: Ben Visser
Sep 08, 2015
Ben is a Wise-owl equity analyst focusing on ASX blue-chips stocks. Ben has a Bachelor of Business in Finance majoring in property valuations and management. In his role at Wise-owl Ben conducts in-depth fundamental and technical analysis which helps him to find profitable investment opportunities on the ASX and abroad.