Australia's business survey: Business conditions dropping back further in Nov

Today's NAB Australia business survey showed business conditions deteriorate from 7 in Oct to 5 in Nov, while business confidence went up from 4 in Oct to 5 in Nov. 

NAB Monthly Business Survey - November 2016

Recent trends in economic partial indicators have been raising some concerns about the underlying strength in the economy. The NAB Monthly Business Survey is no exception, with the aggregate level of business conditions dropping back further this month – falling to its long-run average level for the first time since April 2015. However, in spite of the declining trend in business conditions, business confidence has remained relatively resilient, tracking broadly sideways in recent times and showing a modest improvement in November.

While outcomes in the survey are not pointing to a severe slowdown in economic activity, the results have softened enough to suggest that growth remains sub-trend. Furthermore, both the housing construction cycle and commodity exports are expected to peak in the relative near-term, compounding the challenge to growth further out. Two more 25bp rate cuts are still expected from the RBA next year in response to on-going low inflation and a more subdued growth outlook.  NAB’s latest Australian economic forecasts will be available on Thursday.

According to Mr Alan Oster, NAB’s Chief Economist, “we are becoming increasingly concerned about the underlying momentum in the economy as evidence mounts that the non-mining economy is losing steam. The downward trend in business conditions and signs of weakness in the Q3 National Accounts, beyond one-off influences such as poor weather, lend further support to this view. For now though, we expect to see a fair degree of ‘bounce-back’ next quarter, before the economy resumes its relatively subdued growth track, characterised by muted domestic demand.”