Australia: Business conditions elevated in March - Westpac

Andrew Hanlan, Research Analyst at Westpac, notes that Australia’s business conditions are elevated, the NAB survey reports, with the index unwinding the spike of the past two months - as anticipated.

Key Quotes

“In March, the business conditions index declined by 6pts to +14, a reading well above the long-run average of +2. That fully reverses the gains of the past two months which had taken the index to +20, in line with the record high of 2007.”

“At the time we said, “we were surprised by the extent of the strength in the January update, more so now that conditions moved higher still in February” and argued that “given the balance of other indicators we are still inclined to discount some of the reported strength in business conditions. It may be that shifting seasonal patterns are distorting the results”.”

“Business confidence moderated 2pts in March to +7, a fraction above the long-run average of +6. The survey was conducted from March 23 to 29. This was shortly after the US announced tariff measures - adding to uncertainty around global trade.”

“The survey suggests that the employment conditions index is consistent with jobs growth of around 21k per month. Such a pace would place downward pressure on the unemployment rate decline - unless the participation rate moved higher, a trend which has been evident of late as individuals respond to the improved labour market conditions.”

“As highlighted previously, economic conditions have become more synchronised during 2017 and into 2018, with a turnaround in the mining states of Qld and WA. Business conditions by major state (on a 3 month average basis) are: Victoria, leading the way - as to be expected, +20; Qld lifting to a strong +19; NSW performing well at +17; and WA strengthening to +9, the highest quarterly reading since December 2014.”