Business conditions soar to one-year high in March: NAB business survey

Business conditions soared last month to reach a one-year high according to National Australia Bank’s monthly business survey, rebounding from flood-induced falls at the start of the year and underpinned by improving trading conditions and profitability.

NAB says the business conditions index, which rose 11 points to nine index points, is around three points higher than the long-term average. And the bank says while it’s surprised by how strong the survey is, it expects the good conditions to continue.

“If we take the March monthly reading, and put it into the June quarter, then that would be consistent with 4% annualised growth,” NAB chief economist Alan Oster told SmartCompany.

Oster says while Australia’s gross domestic product might have contracted over the March quarter due to falling exports after the Queensland floods, concern over a negative GDP reading for the quarter would obscure some pretty positive developments.

“We put more weight in business conditions than confidence numbers,” Oster says, noting that confidence and conditions are now aligned.

“We also took a bit of happiness out of the fact that we’ve got positive forward orders.”

The NAB survey shows trading conditions soared to 15 points (from -3) in March, while profitability lifted to 10 points (from -5).

Labour costs were broadly unchanged, the bank said, but continue to trend down in annualised three-month average terms.

And while price inflation remains “relatively low”, NAB did note rising purchase costs.

On interest rates, NAB expects two rate rises this year: one in August to 5%, and another in November to 5.25%.

It still expects the Australian dollar to peak at $US105.