Four things to know about the Australian business confidence data



The NAB business confidence index for the month of July 2016 eased slightly to 4 points in the month of July 2016, following a downward revision to 5 points in the previous month. The monthly data released by the National Australia Bank comprises of a survey of the current business conditions in the country and is used as an indicator to signal changes in future economic activity. A reading above 0 points to improving conditions and below 0 indicates worsening conditions.

Key highlights of the survey include –

Business sentiment looks resilient: Although business confidence was moderately lower compared to the long-term average of 6 points, firms continue to remain positive in-spite of the external factors such as the Brexit and the recently held federal elections, which have posed a risk to market sentiment in the past. Although half of the industries surveyed conveyed lower confidence levels compared to June, none of them reported negative business confidence.


Business Conditions (Source: NAB Monthly Business Survey)

Drop in business conditions: Business conditions slipped to 8 points in July from 11 points in June, largely due to a sharp fall in transportation & wholesale businesses, indicating that a broader recovery is yet to be in place. However, conditions continue to remain elevated above the long-term average of 5 points. The services sector continued to be the exceptional performer in July, while retail prices saw a rebound and employment conditions remained on growth track.

Capex, cash-flow & capacity utilization: The CAPEX index declined modestly in July, mainly due to the adverse capital expenditure in the mining sector, which also reported the weakest cash- flows. The maximum non-seasonally adjusted cash flows were reported in transport and utilities, where the capex was the highest. Meanwhile, capacity utilization recovered after a moderate decline in June, led by the manufacturing sector, pushing up the utilization rates above the long- term average.

Outlook: The survey points to a reasonably positive outlook in the near & medium term. However, in the long term, as resource exports stabilize & dwelling construction turns negative, the risks are pretty apparent. Excluding construction and the finance/ property/ business (FPB), forward orders for most industries declined, led by mining, manufacturing and retail. Global & domestic deflationary pressures could cause a downward shift in the CPI for an extended period, adding pressure on the labour market. These may require additional policy easing by the RBA if inflation has to return to the targeted band.

Even Roy Morgan Research’s Business Confidence for Australia plunged 2.8% to 116.1 in July 2016 post the inconclusive Australian Federal Election. This was despite the fact that the share market did well with the All Ordinaries closing the end of July at 5,644 (up 6.3%) from June 30, 2016.

kunalsa1 (1)

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. and associated websites are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.





Leave a Reply