Business conditions and confidence have both edged down in February and there is no immediate recovery on the horizon, according to the latest results from the regular NAB survey published today.
The survey found the high Australian dollar continued to hurt manufacturing and a lack of non-mining demand weighing on most sectors.
Business conditions weakened a touch in February and continued to be negative, suggesting an economy continuing to grow below trend.
NAB attributes the tick down in activity to a modest fall in profitability of businesses, partly offset by an improvement in employment conditions.
The survey found conditions remain difficult for many industries, especially construction and manufacturing, but there are signs that consumers may have become less cautious in response to recent improvements in equity and housing markets, with recreation and personal services, retailing and wholesaling all improving in the month.
Alan Oster, chief economist at the NAB, told SmartCompany the survey basically found things are still tough.
“We were slightly surprised that confidence edged down because the equity markets are still up but now people are looking carefully at what is happening to their business rather than what is happening to global equity markets,” he says.
“It is a soft patch and you see that in domestic demand and it is not getting any better.”
Oster says the historic highs on Wall Street have been reflected in the Australian stock market but have not flowed through to business.
“You saw it in the local equity market, and that’s why confidence picked up in December and January but it has sort of gone sideways now,” he says.
Oster says the survey found a “most concerning” slump in forward ordering with the index declining to its lowest level since May 2009.
Combined with still low capacity utilisation, stocks, employment and capital expenditure readings, the NAB survey found forward indicators imply little improvement in near-term demand.
“The worst part of the survey was forward orders, which fell very significantly,” he says.
“In terms of domestic demand you are looking at the second half of this year for any recovery; forward indicators say that business conditions are unlikely to be positive for the next three to six months. We are trying not to be too down in the mouth but this is reality.”