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NAB survey says, “unexpected confidence boost”

Now here’s something of a surprise – the National Australia Bank’s February business survey says business conditions ended a three-month slide with a small pick-up, while confidence also rebounded.

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So much for all the talk of an economy being brought to its knees by the 9 rate rises from the Reserve Bank since last May.

The survey showed the rebound was widespread, but while activity and confidence were higher, price pressures also turned higher as well, suggesting that the high annual rate of inflation (7.8%) seen in the December quarter, had continued into early 2023.

The NAB survey is also contrary to the commentary from companies reporting early weak trading trends in January and February in the December half year reports.

Retailers have been reporting sales weak growth, especially online while one of the country’s major whitegoods retailers – The Good Guys saw no sales growth in the first five weeks of 2023.

The surprise improvement in the latest NAB survey results focuses attention on the strength of the January jobs data out tomorrow with forecasts for a rise of 20,000.

The NAB said that after three months of falls, business conditions in January returned to a very high level at +18 index points while business confidence rose 6pts to +6 index points to be around its long-run average.

“The transport & utilities and wholesale industries drove the increase in confidence, with others broadly steady. Across the states, confidence rose strongly in SA, WA, Tas and Vic and is now positive in trend terms everywhere except Qld,” NAB said.

NAB Chief Economist Alan Oster said “The rise (in conditions) was led by very strong trading conditions in the month, but both profitability and employment are also well above average.

Interestingly, it was ‘upstream’ sectors such as wholesale, construction and manufacturing that led the improvement, though conditions also remain strong in consumer-facing retail and personal services sectors,” Mr Oster said.

“Confidence rose back to around average, continuing to rebound from negative reads two months ago. Capacity utilisation picked up and forward orders strengthened, in line with a more optimistic outlook.

“Measures of cost growth also rose after easing through the second half of last year – though they remain well below their mid-2022 peaks.

“Price growth measures also rose. Overall, the survey suggests the economy has remained resilient to headwinds from inflation and higher interest rates.

“Demand has remained elevated, likely supported by strong population growth, and concerns about global growth prospects appear to have eased.”

“From here, the pace of ongoing supply chain healing and strength of wage growth will be important in shaping how much further cost pressures ease, while the resilience of consumption will continue to be tested as higher rates are passed through to households,” Mr Oster noted.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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