Mixed signals on economy
The upturn in sentiment had yet to translate into a similarly significant lift in business activity, while employment conditions stayed soft and pointed to continued weakness in the labour market, the National Australia Bank's monthly survey released on Tuesday found.
The business confidence index rose to 12 points in September, from four in August and minus five in July. Business conditions were minus four last month, up from minus seven in July and August.
"The pick-up in the confidence numbers are very welcome, but the actual business conditions still point to the pressure on labour market outcomes, because business profitability doesn't appear to be improving at all," Commonwealth Bank senior economist Michael Workman said.
The figures came as a monthly ANZ survey also released on Tuesday showed job advertisements rose for the first time in seven months, although they were still 15 per cent lower than a year ago. Tentative signs of improving economic indicators, including a strengthening housing market, saw the Reserve Bank shift to a wait-and-see mode at its October board meeting last week.
The RBA's move led some economists to rethink expectations of interest rate cuts, with NAB, ANZ and Westpac delaying forecasts for the next cut to next February.
Even so, economists said they expected the jobless rate to remain at a four-year high of 5.8 per cent when September labour force figures are released on Thursday. They said the economy needed a sustained rise in business confidence and consumer sentiment, as well as a further fall in the dollar to support export-oriented businesses, to lift above its below-trend pace of growth.
Analysts are also looking for another month of strengthening consumer sentiment figures, to be released on Wednesday, after a 3.5 per cent rise in August.
The finance, business, property and construction sectors had big gains in business conditions, possibly driven by the housing market amid a low-interest-rate environment, NAB chief economist Alan Oster said. But "activity remained worryingly weak in mining and manufacturing, while conditions in transport and utilities recently turned down to very poor levels".
Frequently Asked Questions about this Article…
The NAB monthly survey showed business confidence rose to 12 points in September (from 4 in August and -5 in July), while business conditions remained weak at -4 (an improvement from -7), indicating sentiment is up but activity is still below trend.
Not yet — the article says the pick-up in confidence hasn’t translated into a similar lift in business activity, and Commonwealth Bank senior economist Michael Workman noted business profitability does not appear to be improving.
ANZ’s monthly survey found job advertisements rose for the first time in seven months but remained about 15% lower than a year ago, and economists expect the unemployment rate to stay around a four‑year high of 5.8% when September labour force figures are released.
The RBA adopted a wait‑and‑see stance at its October meeting after tentative signs of improvement (including a stronger housing market), leading NAB, ANZ and Westpac to delay forecasts for the next rate cut until around next February.
Finance, business services, property and construction showed big gains—likely helped by a stronger housing market—while mining and manufacturing remained worryingly weak, and transport and utilities recently turned down to very poor levels.
Economists in the article said a sustained rise in business confidence and consumer sentiment, plus a further fall in the Australian dollar to help export‑oriented firms, would be needed to lift growth above its below‑trend pace.
Investors should watch the September labour force figures and the next consumer sentiment release (following a 3.5% rise in August), along with job advertisement trends and housing market indicators that influenced the RBA’s recent stance.
The article suggests a stronger housing market in a low‑interest environment has helped finance, business services, property and construction sectors, so investors may see improved conditions in companies tied to housing activity while sectors like mining and manufacturing may lag.
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