- Business survey: The NAB business conditions index rose from +6.8 points to +7.7 points in September (long-term average +4.8 points). The business confidence index rose from +5.6 points to +5.9 points (long-term average +5.8 points). The survey was conducted from September 26-30.
What do the figures show?
National Australia Bank Business Survey:
- The NAB business conditions index rose from +6.8 points to +7.7 points in September (long-term average +4.8 points). The business confidence index rose from +5.6 points to +5.9 points (long-term average +5.8 points). The survey was conducted from September 26-30. In rolling annual terms, the business conditions index was just off an 8-year high at +9.9 points.
- Components: the index of trading conditions rose from +12.6 points to +17.3 points; employment eased from +4.1 points to +1.2 points; profitability rose from +4.2 points to +6.5 points; forward orders rose from +2.3 points to a 6½-year high of +8.0 points.
- Inflationary indicators were mixed in September. The monthly reading of labour costs rose at a 0.7 per cent quarterly rate in September, after a 0.8 per cent lift in August. Purchase costs rose at a 0.3 per cent quarterly rate in September, after a 0.4 per cent rise in August. Final product prices were up by 0.4 per cent in September after a 0.2 per cent rise in August. And retail prices were up 0.3 per cent in September after a rise of just 0.1 per cent in August.
- Capacity utilisation eased from 81.0 per cent to 80.6 per cent – below the long-term average of 81.0.
- The proportion of firms reporting that they did not require credit rose from 49 per cent in August to 65 per cent in September.
What is the importance of the economic data?
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.
Aussie businesses seem to be in generally good shape. In fact, the big lift in orders points to better times ahead.
The Reserve Bank has no pressing need to cut rates again. So the overwhelming focus is on the next inflation figures to be released in just over a fortnight. The Reserve Bank may cut rates again but will need to be convinced that it will be effective in generating faster growth and a lift in inflation.