Westpac the with the note.
Already fragile business confidence crumbled, as business conditions slipped further to be a clear notch down from the highs of 2022. Forward orders posted only a small rise – the period of sustained strength during the reopening period has passed.
These were the key finding of the latest NAB business survey.
The February survey was in the field from February 20 to 28.
The business conditions index slipped by 1pt, easing to +17. This continues a moderating trend evident over the past half year.
The business conditions index peaked in the September quarter 2022, at an average of +24. Conditions have eased back by 7pts since then.
The still relatively high level of the business conditions index suggests that the economy is operating at a relatively high level. While the downward trend in conditions is arguably evidence that the economy is cooling – as the intensifying headwinds of high inflation and rapid fire RBA interest rate rises impact.
Official data revealed that domestic demand stalled in the December quarter 2022. Westpac Economics anticipates that annual output growth will slow to a well below trend 1% for 2023.
Against this backdrop of monetary policy tightening, a gloomy domestic economic outlook and a challenging and volatile global environment, business confidence has been increasingly fragile.
In February, confidence crumbled, with the index slumping 10pts to be in the pessimistic zone at -4. Recall that business confidence turned pessimistic last October and fell to -4 in November. The partial rebound in confidence to +6 in January, with the first summer largely “covid free” since 2019, has proven to be fleeting.
