Declining manufacturing sector drags business conditions in Australia: survey


Business Conditions in Australia dropped sharply in February due to the rapid  detriment in the manufacturing sector, while Business Confidence levels also softened but at a reading of +7 (+9 in January), revealed a private survey.

Image credit: Flickr User:  grahampg
Image credit: Flickr User: grahampg

The National Australia Bank (NAB) monthly survey revealed that business conditions in the country fell to zero in February, after registering positive five points in January and positive four points In December.

According to the NAB report, the Trading and Employment components within the Business Conditions index fell markedly during the month (Trading from +8 to +4, and Employment from 0 to -6).

NAB chief economist Alan Oster said conditions dropped rapidly from the near three-year highs posted recently, re-establishing the divergence between conditions and confidence.

“As expected, the sharp turnaround in manufacturing recorded last month was largely unwound, and is now more consistent with the difficult environment that continues to face Australian manufacturers,” Mr Oster said.

“The next largest deterioration came from wholesale (now very weak), followed by services industries. The fall in conditions this month probably reflected a realignment of conditions with underlying fundamentals.”

According to the article on The Australian, forward orders and sales softened but remained positive, while employment conditions were “sobering”, reversing nearly all post-election gains and pointing to further labour market deterioration and a jobless recovery, Mr Oster said.

NAB said it expected the Reserve Bank of Australia to cut the official cash rate by 25 basis points for the last time in this easing cycle in November and did not expect a rate hike until late 2015.

The bank forecasts a 2.7% GDP growth in fiscal 2014, with unemployment peaking at 6.5 % in late 2014, while the underlying global growth is set to continue and it is too early to assess the impact of the evolving Ukraine situation.