Australia’s business conditions weakened marginally in December signaling that activity stabilized in the fourth quarter, survey data from National Australia Bank showed Tuesday.
The business conditions index fell one point to +3 in December. The indicator has remained below average and was also well below the level seen in early 2018.
At -2, the business confidence index dropped 2 points to the lowest since mid-2013. The indicator has fallen for the second consecutive month and was also below average. According to NAB, forward looking indicators do not imply a material improvement in the near term. Forward orders remained weak and capacity utilization was just below average.
The employment index was the bright spot, which was unchanged at +4 index points implied reasonable ongoing employment demand. The trading conditions indicator slid 1 point to +6 points.
At the same time, profitability unwound last month’s increase, ending the year at +1 index point.
For now, the survey has not showed clear evidence of a bushfire impact, but the more significant impact is likely to have occurred in January, said NAB Group Chief Economist Alan Oster.
“At present there appears to be a relatively large divergence between confidence and conditions, and we will continue to watch the survey to see how this resolves,” Oster said.
Though, if confidence and forward orders remain weak, it is likely that the early part of 2020 could see further deterioration in the growth momentum, especially in private sector demand, Oster added. He noted that more policy stimulus will be needed to boost the economy over 2020.