National Australia Bank (ASX:NAB) released its monthly business confidence survey on Monday. The report showed that business confidence remained unchanged in April, but it was still at subdued levels. Because business confidence is still at subdued levels, it is difficult to see a sustained economic recovery developing, the report said. The interest rate cut has yet to have an affect on the broader Australian economy and the bank is unsure if it will have any significant affect.
Although the confidence in mining has recovered slightly, it remains the lowest among all sectors. All components of business conditions, which includes trading, profitability, and employment, weakened in April. However, in trend terms, the recent upward trajectory of conditions remains intact. Conditions in employment dipped back into negative territory in April. Changes in conditions were polarised relative to March. The recovery in the wholesale industry fell back into negative territory. Construction also fell lower in April, but remained in positive territory.
Exports, orders, capacity utilisation and capex eased back and remained subdued. The bank’s economic forecasts will be updated following the Federal Budget tomorrow, but it is unlikely to change much from last month’s forecast. There have been some recent improvements in the economic partials that are encouraging but the non-mining sector needs more investment if Australia is to recover from falling commodity prices. Both consumers and investors remain cautious. The bank’s biggest concern is the weak intentions in business investments. The interest rate cut by the Reserve Bank of Australia was inline with the NAB’s expectations. An additional interest rate cut in the short-term is unlikely, unless unemployment increases faster than expected.