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Business conditions fell slightly in March but there are signs of improvement in both the retail and construction sectors, NAB has said.
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Positive signs for retail and construction in latest business survey
10 April 2024
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The NAB Monthly Business Survey for March indicates that business conditions fell by 1 point to +9 index points.
Trading conditions and employment were broadly steady, while profitability declined 4 points. Business confidence rose 1 point to +1 index point but remains below average.
“We’ve now seen conditions running a little above average and confidence a little below average for the better part of a year, which is a fairly unusual result in the history of the survey,” said NAB chief economist Alan Oster.
“Fundamentally, it tells us that firms have continued to be a bit concerned about the outlook even as the economy has remained resilient.
“At some point, we have to expect these two headline measures to come back into better balance, either because firms’ concerns are allayed and the outlook improves, or because the economy slows further – and of course we hope it will be the former rather than the latter.”
At the industry level, the March survey had positive news for both the retail and construction sectors with a strong rise in conditions and confidence.
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“In trend terms, conditions are still weakest in these two sectors but it is nonetheless encouraging. We will wait to see if they improve further over the months ahead,” said Oster.
The survey also showed that forward orders rose 3 points to -1 index point, with some improvement in retail. Capex was steady at +7 index points, while capacity utilisation eased slightly, to 83.2 per cent.
“The pickup in forward orders this month is another positive sign, though orders remain in negative territory,” said Oster.
“More broadly, the ongoing gradual easing in capacity utilisation is a sign that, incrementally, supply and demand are coming into better balance as we get further from the period of COVID disruptions and border closures and monetary policy works to slow the economy.”
The Westpac-Melbourne Institute’s Consumer Sentiment survey revealed a larger fall in consumer confidence at the April survey, with confidence dropping 2.4 per cent.
CreditorWatch Consumer chief economist Anneke Thompson said confidence has now been near record lows for two years, representing one of the longest periods of consumer despondency since the survey began.
“What should be of concern to retailers is the slump in the ‘time to buy a major item’ index, which was down 6.6 per cent month on month, and is at record lows,” said Thompson.
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