Business conditions remain above long-term averages but a concerning downward trend is emerging, according to NAB Group Economics.
The NAB Monthly Business Survey for October 2016 showed the business conditions index fall two points to +6, the lowest it’s been since May 2015.
Additionally, the business confidence index declined two points to +4, which NAB chief economist Alan Oster said was part of a concerning trend.
“While conditions are still at above average levels, if the recent trajectory continues we could be looking at an economy that is rapidly losing momentum. In fact, we are clearly more concerned than the RBA about the near term outlook,” Mr Oster said.
“Business confidence is also back below average levels. That will need to change if the RBA hopes to see their anticipated recovery in non-mining business investment.”
NAB said that within business conditions, profitability had remained steady but both trading and employment conditions had ‘deteriorated’, and near-term business activity was also “less encouraging”, with forward orders falling to zero.
“The recent moderation in some NAB Business Survey indicators is a concerning trend that warrants close monitoring, but our assessment is that the deterioration to date is not (yet) enough to warrant a significant change in the outlook,” said Mr Oster.
“However, if the recent trends were to continue, it would be unsettling and imply that the non-mining recovery has started to run out of steam earlier than expected.”
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