A slack seasonal retail performance and hibernating non-mining investment have taken the gloss off an otherwise upbeat NAB December business survey, with broader business conditions looking as good as they have in six months.
According to the bank’s monthly survey of nearly 400 firms, Australian business conditions were back with a bullet in December following a Christmas pick-up in turnover driving a jump of 5 points - to +11 for the final month of 2016.
However, NAB chief economist Alan Oster remains unconvinced of any fundamental turnaround.
"Importantly, we are not seeing any real signs of a convincing recovery in non-mining investment in the survey," Oster said. "Crucial to both near-term and longer-term growth prospects."
While business conditions charged back to positive conditions not seen since July 2016 (and way over the long-term median of +5) the survey's measure of business confidence remained tepid and in the thrall of uncertainty at +6 for December.
The NAB data contrasts with this month’s Roy Morgan ANZ business confidence survey which fell in December after three straight months of increases – down 2.6pts or 2.2 per cent to 114.1.
Breath of encouragement
According to Roy Morgan, the fall in confidence coincided with US President Donald Trump's unexpected victory in the US Presidential Election in November, while in early December the ABS reported Australia’s GDP had decreased 0.5 per cent in the September quarter – the first contraction in Australian GDP for over five years.
The NAB survey will be taken as a breath of encouragement for the broader economic outlook, though the general tenor of uncertainty - particularly in the context of a potentially volatile global and domestic new year - ensures upbeat aspects of the survey are viewed as "temporary".
“A return to a more subdued growth track thereafter still seem likely as the positive effects from the housing construction cycle, commodity exports, and (temporarily) higher commodity prices washes out.”
According to NAB, twin 25bp rate cuts are to be expected from the RBA this year, “in response to on-going low inflation and a more subdued growth outlook".
“Weakness in retail conditions is particularly concerning, while we are not seeing any real signs in the Survey of a convincing recovery in non-mining investment – crucial to both near-term and longer-term growth prospects (although the drag from the mining sector should soon ease),” the bank noted.