Yesterday NAB released their monthly business survey for October, not surprisingly it was grim. Key points were as follows:
- Business confidence fell (a record) 21 points to a new record low of -29 index points.
- Business conditions also fell sharply - down 10 points to -11 index points – a level around the bottom of the slowdown in late 2000/early 2001 (-13 points).
- Trading conditions fell 11 points to an index reading of -10. Profitability fell 9 points to -13 index points and employment fell a relatively sharp 8 points to -10 index points.
- The latter is now indicative of labour shedding occurring and is more bearish than the official ABS employment estimates. All three sub components are at levels last seen in the 2001 slowdown.
I found this part of the commentary to be of interest also;
Clearly, the most marked feature of the October survey is the unprecedented collapse in business confidence – after a number of months of relative steady (but weak) readings notwithstanding global turbulence. It appears that the continuing volatility in global equity markets, emergency financial packages, falling commodity prices, and continuing talk of global recession have finally broken business optimism and now fear reigns supreme. Indeed it is worth noting that confidence readings worse than the bottom of the 1990s recession has more to do with fear of the unknown than actual current outcomes. That said, the reading for business conditions for October does point to a further sharp slowing in activity – to levels similar to that reported at the bottom of the 2000/01 slowdown.
The emphasis in bold is mine. Based on available data the economy is not as bad as the sentiment indicates but that is of concern in itself as it begs the question, what does it portend for the future? NAB is saying that we are at least headed for a slowdown equal to 2000/01, that in my view will prove to be overly sanguine.