Despite a slight moderation in business conditions in the September quarter, NAB Group Chief Economist Alan Oster described business conditions as still being "well above long-run average levels".
Commenting on the quarterly NAB Business Survey, Mr Oster said, "They are consistent with solid rates of activity in the non-mining economy right now. At the same time, confidence levels improved slightly, which suggests to us that firms are still reasonably comfortable about their operating environment, even with the numerous uncertainties emanating from overseas.”
According to the survey, businesses are describing the near-term outlook as a good one. They don’t anticipate any clear deterioration in business conditions over the next three to 12 months, and hiring intentions for the next year have actually picked up markedly, said Mr Oster.
"And capital expenditure plans remain much stronger than what some other indicators might suggest.”
Other leading indicators are generally still quite good too, although some momentum has been lost.
“Capacity utilisation took a step back, unwinding the gains from recent quarters, although the longer term trend is still very much a positive one. That is helping to support investment and employment intentions shown by firms. We have even started to see some signs that firms are finding it a little harder to obtain suitable labour, which could translate into stronger wages growth down the road.”
However, it appears that non-mining sector recovery stalled in Q3.
“The service sectors continue to be the clear outperformers, despite softening a little in Q3. The spread of conditions between the major service industries and the worst performers widened a little in the quarter, in part driven by a concerning deterioration in retail and wholesale conditions. Given the importance of household consumption to the growth outlook, this is something we will continue to monitor closely.”
The survey showed very moderate inflation pressures, and businesses expect both their own prices and labour cost growth to remain relatively subdued in the coming quarter."The outlook for business activity in this survey should make the RBA reasonably comfortable, but the inflation picture is less encouraging. However, in light of recent housing market trends, on balance we think a rate cut this year is unlikely, barring an extremely weak Q3 CPI outcome,” said Mr Oster.