NAB’s June Quarterly Business Survey

Posted July 2009

This week we’re delving into the meaty finance chunks of NAB’s June Quarterly Business Survey. Being a survey of around 1000 small to large-sized, non-farming companies, it’s probably Australia’s most comprehensive look at current business performance and how business feels about the future.

Overall the news is good. The survey recorded its first quarterly improvement since the 2008 March quarter with improvements across trading and profits, employment and general expectations. However, these figures are still pretty weak against the historical performance and the survey does warn that this may be temporary so don’t count your chickens yet.

On the employment front things are getting ‘less bad’ with the pace of job shedding slowing but hours worked cut back. NAB number crunchers still reckon unemployment will hit 7% by end 2009 and 8% by late 2010 – currently it’s 5.8%, so that’s around 80,000 more Aussies out of work by late 2010. Not surprisingly, the biggest falls for hours actually worked were in industries most affected by the global meltdown like mining, construction, manufacturing and transport. People in recreation worked the least mainly due to punters having less to spend in pubs and clubs but thanks to the cash splash the retail sector has kept people relatively busy.

Meanwhile Australian business confidence has soared to its highest level since the start of the world economic crisis. While this won’t directly affect you now these things do eventually trickle down. As businesses starts to employ more people and buy more machinery to make more stuff there’s more money around so we buy more things. This all multiplies the amount of money in the system which means better job security for one and all.

With the economy holding up better than expected NAB reckons the RBA will keep interest rates on hold and watch and wait for a bit longer yet. However, this will depend heavily on what happens between now and the end of the year particularly if things start to pick up in China as they buy so much of our exports and exports bring money into the country. BTW the survey sees plenty of evidence that things in China are picking up.

So all in all not a bad outlook, but let’s hope these green shoots don’t get eaten by a black swan event.

In other news …

Unlike employment, which is pretty slow to react to both improvements and downturns, the stock market is pretty sensitive to all developments. So with the Australian share market nearing nine-month highs after 10 day’s straight market gains to Wednesday 29 July there may be reason for some quiet, rational exuberance. To give you some perspective, on writing this, the All Ordinaries just closed down a tad to 4148.90, which is still a long way up from the 3111.70 low on 6 March, 2009.