NAB Business Conditions and Confidence hits multi-year highs in April

The National Australia Bank (NAB) monthly business survey posted another strong result in April, with both business conditions and confidence improving - pointing to ongoing strength in business activity in the near-term. 

The report says, “The business conditions index rose 2 points, to +14 index points, which is well above the long-run average (+5) and its highest level since early 2008. Meanwhile, Business confidence came more into line with business conditions in April, hitting its highest level since 2010 (up 7, to 13 index points).”

Key points

Solid levels of business conditions have begun to look more uniform across industries and states.

Retail is still a concerning exception, but a notable improvement in the month of April was a step in the right direction. We do, however, remain somewhat cautious about the consumption and retail sector outlook given the challenges ahead.

By component, employment conditions drove most of the improvement in business conditions this month, while profitability was steady.

Forward orders are suggesting positive near-term prospects for activity, and if current levels of confidence are sustained, that could also translate into an even better read on capex activity down the road.

The longer-term economic outlook is somewhat less certain, however, as important growth drivers, such as LNG exports, commodity prices and housing construction, begins to fade. Despite that, the RBA’s emphasis on financial stability concerns are expected to keep them on hold for the foreseeable future.