Business conditions gain momentum

07_Business conditions gain momentum

By Lucy Hughes-Jones
(Australian Associated Press)

A rebound in business conditions amid global uncertainty suggests the non-mining recovery hasn’t wavered.

Business conditions rebounded in February after tumbling to a one-year low in January, according to figures from National Australia Bank on Tuesday.

NAB’s index of business conditions rose by three points to plus eight, lifting well above the long-run average.

NAB’s chief economist Alan Oster says the result confirms low interest rates and a lower, more competitive currency are having the desired effect.

The services sector remains the clear outperformer and drove the gains, while mining, manufacturing and wholesale lag behind.

“The service sectors have very much stepped up and are now driving an impressive rebound in non-mining domestic demand,” Mr Oster said.

However he noted conditions in both mining and wholesale still managed to bounce back from large declines last month.

And while confidence hasn’t reaped the benefits of better conditions, it remains resilient in the face of global volatility, the business survey showed.

The confidence index remained flat at plus three points in the month, with upbeat domestic factors helping to offset abating concerns on the global stage.

“Positive confidence levels suggest the risk of contagion from financial markets has probably fallen compared to recent months,” Mr Oster said.

And despite below-average business confidence, there was a strong pick-up in firms reporting capital expenditure in February.

This, combined with falls in spare capacity and strong profits, points to improved prospects for company spending and employment, the survey showed.

Mr Oster said there are finally signs that non-mining investment is starting to fill the void left by mining projects, which is critical to future economic growth.

As such, NAB expects interest rates to remain on hold for an extended period, in contrast to market expectations of another cut by year end.

But of key focus will be whether the non-mining sector maintains momentum and the future path of the unemployment rate, NAB said.


Like This