Australia: Business confidence and conditions deteriorate in March but are still solid
April 10, 2018
The business confidence index produced by the National Australia Bank (NAB) decreased to 7 points in March from 9 points in February. However, the series still sat slightly above its long-run average and the neutral 0-point threshold, indicating that Australian businesses are largely optimistic regarding economic conditions. March’s print could have reflected fears of a potential trade war between the U.S. and China—Australia’s largest export market.
Looking at the sector-by-sector picture, the construction, manufacturing, and transport and utilities sectors grew less optimistic, while the mining sector became more optimistic on the back of elevated commodity prices. All sectors remain firmly in positive territory. Meanwhile, business conditions fell in March from an all-time high in February on the back of deteriorating trading conditions, profitability, employment and forward orders. However, business conditions remain well above their historical average. The capacity utilization rate inched down in March but remained at a near-decade high in trend terms. Coupled with elevated profitability, this bodes well for non-mining business investment this year.
Australia Fixed Investment Forecast
FocusEconomics Consensus Forecast panelists expect fixed investment to expand 2.6% in 2018 and 2.2% in 2019.
Author: Lindsey Ice, Economist