Australian business confidence has surged to its highest level in well over a year, thanks, it seems, to the effects of the free-spending federal budget, the stockmarket and commodity rally and last week’s better than expected growth figures.
The ANZ’s job ads series for May fell 0.2%, the lowest fall for months. And several major international financial oversight groups have expressed cautious optimism that the worst of the global crunch is over.
The better business confidence came in the latest monthly survey of business conditions and confidence from the National Australian Bank.
The NAB said that business confidence rose 12 index points in May to minus-2 index points, the highest level since February of last year.
The news improves the chances that the May consumer confidence figures, out tomorrow, will show a rise after the Roy Morgan figures showed another jump in May in its latest report released last week.
The NAB’s chief economist, Alan Oster, said that the burst of business confidence was “broadly based but particularly marked in the domestically-driven industries, with notable improvements in construction, manufacturing and wholesale, taking heart from budget infrastructure spending.”
However, the NAB said that actual business conditions slipped in May, though on a trend basis they were broadly steady with April.
“Business conditions slip back with decline in trading conditions; steady profitability and sharply deteriorating employment. On a trend basis, however, business conditions were broadly steady.
“Forward orders also slipped back. Capacity utilisation fell to near cycle lows. April/May Surveys consistent with subdued domestic demand in June quarter,” the bank said.
The NAB’s survey’s readings echo those from a couple of major international financial overnight groups, especially the Organisation for Economic Co-Operation and Development.
The OECD, which publishes its new economic outlook later this month, was the more optimistic. I saw the 30 major economies (plus some not included in the group, such as China and India) showing fragile signs that the crisis and recession in many countries may be easing or have reached a low point.
On the basis of its April leading indicators, it warned that the damaging effects of the global crisis are still worsening in many emerging economies.
The OECD said that although it was too soon to say if data for the leading industrialised countries marked “a temporary or a more durable turning point,” its index of leading indicators showed that the dire winds of contraction were easing.
It said the latest monthly figures for April, “point to a reduced pace of deterioration in most of the OECD economies with stronger signals of a possible trough in Canada, France, Italy and the United Kingdom,” the OECD said. Compared with data for the previous month “positive signals are also emerging in Germany, Japan and the United States.”
World Bank head Robert Zoellick was a bit more cautious in comments made overnight, saying there was still considerable uncertainty, but China’s growth could surprise “on the upside”.
And, the Bank For International Settlements (BIS) suggested that the impact of the intense recession was moderating in the financial systems of the globe and in the major economies. But the IMF said in a statement that the Eurozone economies still had problems to overcome and recovery there would slow, especially with little action taken to repair the damage to the area’s financial system.
The NAB said its outlook for unemployment worsened in May, while profitability was broadly steady at -9 in May (-10 in April).
That was “was more than offset by a fall in trading conditions to -7 (-3 in April), there was a sharp fall in employment to -25 (-18 in April).”
“We see unemployment reaching 6.75% by end 2009 and 8% by late 2010. A further decline in the terms of trade will put pressure on corporate profits and the Government’s fiscal position,” the NAB warned.
The bank trimmed its forecast for 2009 economic growth to a contraction of only 0.5%, which is better than the 1% contraction originally forecast by the bank. Helping this cut was the better than expected first quarter economic growth figures of 0.4%.
It expects a “fairly modest recovery” of about 2.25% in 2010, with government spending helping to pump prime the economy.
“These forecasts reflect weak export markets and falling business investment,” said Mr Oster. “The extent of recent wealth destruction is also likely to see very low growth in consumption especially after the tax bonuses wash out and unemployment increases.”
ANZ job ads fell 0.2% in May, pointing to more weakness in the job market in the months ahead. It was the 13th consecutive month of declines in the series, but this was the smallest fall this year.
The low in April was a record, so the fact there was little change is a tiny glimmer of hope that the fall in job ads may have steadied. May’s figure though was a massive 49.1% under where they were a year ago.
Now for the May jobless figures and unemployment rate on Thursday when the ABS releases its first report based on the old sample size since June of last year.