NAB Quarterly Survey – confirms recent change in RBA rhetoric

I was on the road yesterday so I didn’t get a chance to post on the NAB quarterly Business survey which in no uncertain terms was not a good result. Much focus will be on Europe this morning so I’ll keep this short but the key point is that the quarterly business survey, which is a much broader and more in depth survey than the monthly version, continued the trend of soft domestic data.

The NAB’s high level summary included in the releases said that,

although business conditions improved slightly in the June quarter, they remain soft with confidence down and further weakness expected in the near term. In the quarter profitability rose, employment eased a little and trading conditions were broadly unchanged. Forward orders remained weak and stocks were unchanged, consistent with softer domestic demand in the near term

This is consistent with the Westpac index of leading indicators that we reported on a couple of days ago.

The current conditions index was up 1 point over the quarter to 3 while the outlook for conditions diminished with the index for the next three months down 5 points while the index for the next 12 months was down 1 point. However it is the divergence in business conditions across different industries that is a much bigger concern as it continues to widen with the NAB saying that

overall the gap between weak & strong industries is reaching historical highs”. The breakup of the fall in confidence was also quite concerning as “a loss of business confidence was recorded across a majority of sectors in the quarter, with the most significant declines in finance and mining

The weakness in house prices and falling credit growth are quite clear concerns for the finance sectors while the carbon tax is likely to be behind the fall in confidence in the mining sector.

The key take away is that like the leading index yesterday, the NAB business survey suggests we are in for an enduring period of weak aggregate demand. This weakness is aggregate demand is likely to be accompanied by an easing in inflationary pressure. Supporting this is the fact that the employment index continues to trend lower but more importantly the employment index has a strong correlation with employment costs. So with lower aggregate demand, lower inflation and wage pressures the RBA has plenty of time to determine the future path of interest rates.

This blog is for information only and does not constitute advice. Neither Greg McKenna nor Lighthouse Securities has taken your personal circumstances, objectives or financial situation into account. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.

If you do need economic, investment or financial advice we are happy to help.

Please Email the team at Lighthouse at or Greg directly on

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