NAB Business survey; Consumer confidence; Credit & Debit cards
- Business survey: The NAB business conditions index rose from +8.2 to +12.3 points in March – an 8-year high. And the business confidence index rose from +3.4 points to +6.1 points. The survey was conducted from 23 to 31 March.
- Consumer confidence: The weekly ANZ/Roy Morgan consumer confidence rating fell by 1.4 points (1.2 per cent) to 112.0 in the week to April 10. Confidence is up 2 per cent over the year and in line with average of 112.0 since 2014.
- Credit cards: The average credit card balance rose by $52.30 (1.7 per cent) to $3,166.60 in February. In smoothed terms (12 month average) the average balance was down by 1.7 per cent – the biggest fall in 21 months.
- Credit limits: Usage of credit card limits rose from a 14-year low of 34.3 per cent to 34.9 per cent in February.
What does it all mean?
Aussie business is in good shape. Business conditions are the best in eight years while confidence levels are above ‘normal’ and the best in six months. Even capacity use is near 6-year highs and above longer-term averages. The only barrier that lies ahead is the election. Unfortunately elections cause consumers and businesses to hold back on spending, employment and investment plans, and that is the risk to the positive momentum that has built up in recent months.
Clearly the latest business survey suggests that current interest rate settings are appropriate and that further stimulus is not required. Other data out today shows consumers are still confidence although there has been some slippage. But consumers are still spending, but with their own cash – debit card transactions are up 18 per cent on a year ago
The Australian economy is nicely balanced at present with healthy business conditions; confidence that is neither euphoric nor downbeat; a well-balanced job market; and an economy characterised by strong home building and an absence of price pressures.
What do the figures show?
National Australia Bank Business Survey:
- The NAB business conditions index rose from +8.2 to an 8-year high of +12.3 points in March (highest since February 2008). And the rolling annual average rose from +8.3 points to a near 8-year high of +8.8 points (highest since August 2008). The business confidence index rose from +3.4 points to a 6-month high of +6.1 points (long-term average +5.8 points). The survey was conducted from 23 to 31 March.
- NAB noted: “Conditions in both transport (up 18) and manufacturing (up 16) bounced back strongly from negative levels last month. Construction (up 5) and wholesale (up 4) also improved. Following this, construction conditions are again on par with the service industries, which had been consistently outperforming. In contrast, both the mining and retail industries recorded a deterioration in conditions, with the latter being the most concerning given the importance of consumption to the non-mining recovery.”
- “Business conditions fell notably in Queensland (down 10) and were marginally lower in NSW (down 1). However, big gains in WA (up 13) and SA (up 8) meant conditions were positive in all states in March. This suggests a sharp turnaround in the mining states, but trend conditions in WA and SA remain weak (both at -7). Of the mainland states, trend conditions are best in NSW (+13) and Vic (+12). In terms of confidence, NSW and Vic are high, but firms in Qld are most confident, while confidence remained negative in WA (despite improving).”
- It is worth noting that business conditions remain best in Tasmania (+45), well ahead of next best Victoria (+19).
- Components. The index of trading conditions rose from +12.4 to +17.9; employment improved from +0.7 points to +5.2 points; profitability rose from +10.8 points to +14.4 points; forward orders fell from +2.8 points to -0.8 points.
- Inflationary indicators were mixed in March. The monthly reading of labour costs rose at a 0.7 per cent quarterly rate in March, in line with February. Purchase costs rose at a 0.5 per cent quarterly rate in March, after a similar rise in February. Final product prices were up by just 0.1 per cent in March, after a 0.2 per cent lift in February. And retail prices were up by 0.4 per cent in March after a 0.3 per cent gain in February.
- Capacity utilisation lifted from 81.5 per cent to 82.1 per cent, above the long-term average of 81.0 per cent.
- The proportion of firms reporting that they did not require credit lifted from around 48 per cent to 72 per cent in March.
- The weekly ANZ/Roy Morgan consumer confidence rating fell by 1.4 points (1.2 per cent) to 112.0 in the week to April 10. Confidence is up 2 per cent over the year and in line with average of 112.0 since 2014.
- Two of the five components of the index fell in the latest week:
- The estimate of family finances compared with a year ago was down from +9 to +3;
- The estimate of family finances over the next year was up from +28 to +29;
- Economic conditions over the next 12 months was down from -4 to -6;
- Economic conditions over the next 5 years was unchanged at +3;
- The measure of whether it was a good time to buy a major household item was unchanged at +31 points.
Credit card lending:
- The average credit card balance recorded a seasonal increase of $52.30 (1.7 per cent) to $3,166.60 in February. Compared with a year ago, the average credit card balance was down 1.7 per cent. In smoothed terms (12 month average) the average balance was down by 1.7 per cent – the biggest fall in 22 months.
- Of credit cards attracting interest charges, the average outstanding balance rose by $44.50 in February to $2,026. The average balance accruing interest is down by 2.5per cent on a year ago. In smoothed terms (12 month average) the average balance was down by 5.5 per cent on a year ago.
- The average credit card limit fell by $2.10 to $9,073.90 in February. The average credit card limit in February was unchanged on a year ago. Usage of credit card limits rose from a 14-year low of 34.3 per cent to 34.9 per cent in February.
- On average, there were 11.8 transactions made per each credit card account in February, up from 10.4 a year ago. The average value of purchases was $113.20 in February. The rolling annual average of purchases eased from $129.40 to $128.00 in February - an 11½-year low.
- The number of cash advances recorded a 1.9 per cent annual fall in smoothed (12-month average) terms in February.
Debit card lending & ATMs
- The number of debit card accounts rose by 3.2 per cent in the year to February to 41.79 million.
- The number of purchases and cash-out transactions made with debit cards in February was up by 18 per cent on a year ago – the strongest growth in more than 5 years (August 2011). The annual growth rate has averaged 12.3 per cent over the past two years.
- On average there were 8.86 transactions made per debit card in February, up from 7.5 a year ago. The average value of a transaction was $51.74 with the rolling annual average at $53.25 – a record (12-year) low.
- Transactions at automated teller machines in February were down by 4.6 per cent on a year ago. In smoothed terms, ATM transactions were 6.5 per cent down on a year ago, improving from the biggest decline on record (7.2 per cent) in January.
What is the importance of the economic data?
The ANZ/Roy Morgan weekly survey of consumer confidence closely tracks the monthly Westpac/Melbourne Institute consumer sentiment index but the former measure is a timelier assessment of consumer attitudes and is now closely tracked by the Reserve Bank.
The monthly National Australia Bank business survey is valuable in providing a timely reading about the health of Corporate Australia. Key indicators of business conditions such as orders, employment, profitability and capacity use are covered together with a gauge on confidence levels.
The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
What are the implications for interest rates and investors?
The Reserve Bank can remain on the interest rate sidelines. It would take an exceptionally low reading on inflation to tempt the Reserve Bank to cut rates again. Simply, with activity levels healthy, the Reserve Bank would expect that inflation was more likely than not to trend higher over time.
Both businesses and consumers are reluctant to take on more debt – a situation that provides more confidence about the sustainability of the current expansion.