Business optimistic, conditions worse: NAB

Michael Mehr
(Australian Associated Press)

 

A survey of businesses recorded a spike in confidence during May despite conditions continuing to crumble and the country’s retail sector being “clearly in recession,” economic analysts say.

The National Australia Bank’s index of business conditions, a monthly survey of about 550 companies released on Tuesday, dropped 2.0 points to +1 while its index of confidence gained 7.0 points to +7.

The bounce in business optimism was likely because of the result of the federal election of May 18 and anticipation of interest rate cuts, NAB researchers said, as the survey was sent out to companies on May 14 and interviews started on May 20.

A NAB summary of the business poll noted conditions in the retail sector were deteriorating and now at the same levels as during the global financial crisis.

“This suggests that the consumer remains highly cautious with anything but spending on essentials because of ongoing slow income growth, high debt levels and possibly some concerns over falling house prices,” NAB economist Alan Oster said.

He added that the increase in confidence – which, thanks to the new results, was now just above average – could be short lived.

“We think this will be a short-term spike given other forward-looking indicators saw further deterioration in the month. Forward orders declined further and, in addition to being well below average, are negative,” Mr Oster said.

The business conditions index indicated declines in trading and profitability while employment gained after a sharp decline in the previous month.

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