Business conditions and confidence jump again

NAB's monthly business survey for October showed yet another jump in business confidence, up a further two points to 16 index points.

While the further jump in confidence is surprising given how hard confidence has run this year, what is particularly impressive is the jump in actual business conditions, which increased nine points to 12 index points - the highest level since early 2008.

"The most striking finding in the October Business Survey is the sharp acceleration in actual business outcomes. While confidence has surged in recent times, business conditions had remained significantly below long-term averages. That has now changed," NAB chief economist Alan Oster says.

"In many ways, very high business confidence readings appear to be bearing fruit."

All three measures of actual business conditions jumped sharply during the last three months. Business profits increased by 9 to 13 index points, sales increased by 15 index points and the employment index recorded its first positive reading August 2008, just before the collapse of Lehman Brothers.

Another very positive sign is the pick up in stock levels, with businesses no longer simply drawing on excess stock to meet higher demand.

"It appears that the recovery is broadening out and business is becoming more convinced of its sustainability."

However, exports remain low, indicating that the recovery is very much based on the domestic economy.

From an industry perspective, wholesale, retail and construction remains unchanged but growth is strong in the transport, manufacturing and personal and recreational services sector (which includes hospitality and tourism).

On a state-by-state basis, Victoria is the best performing state, followed by New South Wales and South Australia. Confidence in Western Australia is also improving in line with a pick up in the mining sector.

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written by cashstream, November 10, 2009

It is interesting to see business confidence levels on the rise in general, which is providing further hints that the economy MIGHT be beginning to turn positively. My only concern is that the traditional industries that lead an economy out of recession - recruitment, printing and construction are all still generally very weak. We are seeing funding enquiries from those companies seeking working capital within infrastructure based projects and other government based stimulus package activities - e.g. solar power and insulation, but the "real economy" still seems to have weakness. When this is further considered against 3-4 months of difficult trading about to hit with the Holiday Season - which slows cash down for everyone. Hopefully this downturn effect will not be sufficient to drag the economy down further - but certainly have an adverse affect.