National Australia Bank’s Monthly Business Survey for December 2017 saw the business conditions index unchanged at a strong +13 index points, which is well above the long-run average of +5 index points.
Meanwhile, the business confidence index bounced 4pts to +11 index points, the highest level since July 2017, perhaps driven by a stronger global economic backdrop. The jump has reversed the downward trend that had been apparent since around mid-2017.
According to Alan Oster, National Australia Bank Group Chief Economist “This has helped to narrow the perplexing gap between business conditions and confidence evident over the past couple of years, and is an encouraging signal for investment. That said, while business conditions have held at a high level through 2017, they have tended to outperform measures of activity in the national accounts in recent times.”
In contrast, forward orders have been giving a fairly accurate read of domestic non-mining economic activity as per the official national accounts. Forward orders have pulled back a touch on average in the past three months, although continued to suggest that growth in non-mining domestic demand should acceleration from H1 2017 and maintain that momentum in the early months of 2018.
By component, both trading conditions (sales) and profitability gained on already high levels, while employment conditions eased back a touch. Strong business conditions are broad-based across all major industry groups with the exception of retail.
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A National Australia Bank insight