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MNI POLICY: Australia NAB Survey Point To Jobless Rate Decline

--NAB Business Conditions, Confidence Up in September
By Sophia Rodrigues
     SYDNEY (MNI) - Business conditions remained at an elevated level in
September, as a rise in employment index offset the decline in forward orders,
boding well for the outlook for the Reserve Bank of Australia's monetary policy
for the next move in the cash rate to be up.
     The employment index points to a decline in the unemployment rate over the
rest of this year and into 2019, and is key to the RBA's forecast for gradual
rise in wages growth and for inflation to rise to the middle of its target band.
     The monthly business survey, published by National Australia Bank Tuesday,
showed business conditions rose to +15 in September from a downwardly revised
+14 in August. Business confidence also edged higher to +6 from +5 in August.
     The elevated level of business conditions was mainly due to high
employment, profitability and trading levels which offset a decline in forward
orders and stocks. Forward orders gave up the entire gains made the month before
to be back at an average level of +2.
     In the latest month, the rise in employment index was the highlight and it
suggests employment growth of over 20,000 over the next six months. According to
NAB, the index along with other labor market indicators and a stabilization in
the participation rate, suggests further declines in the unemployment rate over
the rest of 2018 and into 2019.
     Even economists at ANZ retained their view for gradual decline in the
jobless rate despite their own job advertisement survey for September, published
Monday, suggesting slower growth in employment that pointed to a steady
unemployment rate.
     One concerning aspect in the latest survey was weak inflationary pulse in
the economy with both input and output prices measures declining. Retail prices
was the main laggard, recording a 0.1% decline on a quarterly basis compared
with +0.8% in the August survey. Compared with history, surveyed price measures
remained weak.
     Also disappointing was the persistent weakness in retail conditions which
once again was the only industry to record negative conditions.
     NAB provided further details about a question on borrowing conditions asked
in the survey. The responses suggested that while there has been a tightening in
conditions over the past year, it has not been been very significant and is
smaller than experienced in 2011-2012 and also significantly less than occurred
during the global financial crisis.
     Below is the table from the survey:
                                          September  August
Business Confidence                              +6      +5
Business Conditions                             +15     +14
Trading                                         +17     +18
Profitability                                   +14     +14
Employment                                      +12      +9
Exports                                           0      -1
Forward Orders                                   +2      +5
Stocks                                           +1      +5
Retail Prices (quarterly rate %)               -0.1    +0.8
Labor costs (quarterly rate %)                 +1.3    +0.9
Final products prices (quarterly rate %)       +0.9    +1.3
Capacity Utilization (%)                       82.1    82.3
--MNI Sydney Bureau; tel: +61 2-9716-5467; email:

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