Business conditions have continued improving, and confidence is also up, pointing to the chance of a strong GDP result.
The widely-watched NAB Monthly Business Survey for January found conditions have consolidated December’s jump into positive territory by edging higher still from +3 to +4 – that is near a three-year high.
Confidence also bounced back from some declines over the past few months, rising from +6 to +8.
Both readings are around or just above long-term average levels, which has NAB’s economists revisiting their economic growth forecasts.
“The survey implies GDP growth will rise to almost 3 per cent in Q4 [the fourth quarter] … above our forecast,” the bank’s economists noted in the report.
“Applying trend conditions for January implies stronger growth again in Q1 at 3¼ per cent. In contrast, for early 2014 our wholesale based leading indicator points to a much softer level of business conditions, implying GDP growth of around 3 per cent for Q1.”
Australia’s gross domestic product grew just 2.3 per cent over the year to September, so a 3 per cent result for the year to December would be a strong acceleration.
However, NAB has maintained its longer term forecast for 2014-15 at 3 per cent, despite a rise in its forecast for the current financial year from 2.5 to 2.7 per cent.
The ABS GDP figures for December will be released on Wednesday March 5.
Manufacturing, construction and retail lead
NAB says manufacturing, construction and retail experienced the biggest turnarounds in conditions during January, while all other sectors deteriorated.
Confidence is now positive for most industries, although wholesale and mining are both negative.
The bank also points to a steep jump in forward orders (from -2 to +6) as a sign that a business rebound is underway.
However, NAB’s employment index remained subdued, rising from -4 to +1, which the bank says suggests a “jobless recovery.”