So it turns out business conditions are the best they’ve been since early this year and are trending up, but business confidence has dropped to its lowest level since the federal election. Go figure.
About the most encouraging economic news this year had been the way business confidence picked up after the May budget. It’s been promising that non-mining investment would in turn improve in its wake.
As has been written countless times, growth in non-mining investment has been the missing ingredient is a successful, sustainable transition for our economy from dependence on resources.
But Tuesday’s NAB business confidence survey for August showed all the Budget confidence lift has been lost.
The July overall index also had dipped, but pretty much all of that dip had been the resources sector – non-mining confidence had held.
Yet the same NAB survey also counts business conditions.
They differ considerably from state to state, yet the overall story is that business is picking up on several important fronts.
The next question will be whether CEOs and boards will follow the conditions or what they tell survey takers about how confident they are about the future.
My suspicion is that business types are becoming as over-surveyed as consumers.
For all the attention we give consumer confidence surveys, there’s not much correlation between what consumers say and what they do.
For all that consumer confidence has been up or down or sideways, consumption has been growing.
The three things we tend to spend the most money on – housing, cars and international travel – have all been running at record levels.
Confidence aside, there were several encouraging aspects in the latest NAB survey.
The measure of forward orders rose to be “significantly” above its long-run average.
Capacity utilisation rose to 81.2 per cent, its highest level since early 2012.
As the NAB commentary notes: “The trend continues to show a tightening of spare capacity, which bodes well for both non-mining business investment and the labour market.”
Still, capacity utilisation is only around its long-term average. is that capacity utilisation.
And the NAB’s capital expenditure index was steady at +6, which is above its long-run average.
“This points to a stronger expansion of non-mining business investment than ABS data currently indicate,” says NAB. Which is what we all should hope.
NAB attributes much of the improvement to the lower currency and low interest rates steadily doing what they’re supposed to do.
Certainly I am hearing more stories of exporters doing better and local retailers benefitting from on-line retailing losing some of its shine along with the Aussie.
I’d add another suspicion: management is running out of things to cut to make budget – they’re increasingly at the point of needing to invest to get the growth to earn their bonuses.