Business conditions were healthier last month than at any point since the global financial crisis, but that failed to translate into confidence, National Australia Bank says.
The bank’s monthly business survey revealed its business conditions index jumped 5 points in March to +14 points, well above the long-term average of +5 and the highest figure since the financial meltdown of 2008.
The jump in business conditions came as a surprise, said NAB chief economist Alan Oster, and could have been partly due to a lower response rate in cyclone-hit North Queensland.
“Even so, conditions have improved almost across the board to levels that suggest a strong economy in the near-term,” he said.
He said most industries were showing improved business conditions, with services the stand-out performer and the long-struggling mining industry improving thanks to higher commodity prices and an improved global demand outlook. Retail conditions bucked the trend and dipped.
Despite these positive indicators, business confidence fell one index point in March. That was lead by a 13-point deterioration in confidence among wholesalers and a 3-point drop in personal services.
Mr Oster said the results were encouraging for the near-term outlook and supported the bank’s forecast for economic growth to accelerate in the second half of 2017.
“However, there is still cause to be cautious about the longer-term outlook, particularly as other growth drivers, including LNG exports, commodity prices and housing construction, begin to fade,” he said.
“Meanwhile, the RBA has emphasised its financial stability concerns, which are expected to keep them on hold for the foreseeable future.”