The quarterly business survey from the National Australia Bank produced a mixed report card: there was further moderation in business conditions, but a worsening in expectations to an all time low and the bank warns the risks remain all on the downside of things worsening.
The NAB’s survey came out just before the Reserve Bank issued the latest private credit figures yesterday for the month of March.
They showed a small rise of 0.1% after being flat in February, thanks to an 0.6% rise in home lending (and steady now for three months in a row on February and January’s rise of 0.6%), offset by an 0.6% fall in business lending (mainly a fall in foreign currency lending). That was after a fall of 0.5% in February.
Overall credit growth though slowed again in March to be up 4.9% in the 12 months, compared with a 5.7% increase in the year to February and a 15% rise in March 2008.
Personal credit fell 0.3% to be down 6.2% in the year to March as the amount lent through margin lending fell.
Business lending rose 4.1% over the year to March compared with the 5.9% rise in the year to February.
All the credit growth figures fell in the year to March, a clear sign of the recessed nature of demand for money from everywhere bar housing for owner-occupiers.
The RBA’s credit figures confirmed that essentially gloomy survey from the NAB.
On the plus side the NAB said that its Australian forecasts remained unchanged: we are going to have a mild recession, but it lowered its forecast for global growth to a fall of 1.5% to reflect steeper falls in activity in Asia and eastern Europe.
The latest report was finished before the steeper than expected fall in US first quarter growth of 6.1% annual, from 6.3% annual in the 4th quarter of 2008, virtually no change.
German growth was downgraded for a 6% slump in 2009, but another report this morning showed that the six month collapse in Japanese industrial production had stopped.
Factory production rose 1.6% from February, when it fell 9.4% from January.
Analysts had forecast a rise of around 0.8%, so everyone is chuffed they missed on the low side. It’s a sign the collapse in production has steadied, but there’s no sign of an actual rebound, despite what some read into the news.
The Japanese government had forecast a rebound in output in March and it forecast further rises in April and May (http://www.meti.go.jp/english/statistics/tyo/iip/index.html).
It is ‘good’ news for Australian raw materials exporters who have watched prices and volumes slashed by Japanese and other Asian buyers as demand for exporters and products at home collapsed and output plunged from November onwards.
The NAB believes that it’s too early to factor this in: it said the ‘green shoots’ of improving indicators claimed internationally were not showing up in actual data.
"Business conditions in Q1 falls again albeit moderately.
"Having fallen for the fifth month in a row conditions are now the lowest since 1992.
"Confidence improves moderately but is still at a level similar to that reported at the bottom of the 1990s recession," the NAB said.
"More disconcertingly, business expectations for the next 12 months fall to the lowest level since the Survey began in 1988.”
But several other measures in the NAB survey were also of concern:
"Forward orders fall further to levels not seen since June 1991 and labour markets are forecast to weaken sharply – with large falls in hours worked already experienced
"Capital expenditure plans up a touch but still remain (other than last quarter) at record lows. Capacity utilisation falls sharply – below 80% for the first time since 2000."
The slumping level of demand and rising tide of jobless means that finding labour is no longer a problem.
The NAB said this measure (finding suitable labour) collapsed to levels not seen since Q3 1992.
"Lack of demand seen as the core issue. Exports fall to record lows and forward orders for exports very weak.
"Wage pressures sharply lower in a weak labour market. Overall prices also slowing but remain high, given sticky purchase costs.
"With upside risks to our unemployment forecasts (peak 7¾%) building, RBA to reach a low of 2% by late 2009."
Next week we get the early March and April information on jobs (April), retail sales, trade, building approvals and home prices for the March quarter.
