More evidence yesterday that the pace of activity in the economy is slowing after the strong March quarter.
Business conditions fell last month, but confidence remained solid, according to the to the NAB’s latest monthly survey of business.
At the same time, job ads fell sharply in May in the first monthly fall so far in 2014, with the loss of confidence among consumers from the federal budget hitting hard.
And housing loans were weaker than expected in April, according to figures from the Australian Bureau of Statistics.
The National Australia Bank’s monthly business survey found confidence unchanged at an index of seven points in May, but business conditions eased slightly because of weaker sales.
According to the NAB’s chief economist Mr Alan Oster, the solid level of confidence was "a little surprising given consumer reactions to the (federal) budget”.
Mr Oster said firms were "still discounting persistently soft levels of business conditions and the negative sentiment surrounding the Federal budget – including the post-budget collapse in consumer confidence”.
He also noted that business was relatively sheltered from the budget and that confidence might come under pressure once the drop in consumer confidence starts working its way through sales and profits (as we saw with Pacific Brands, The Reject Shop, Noni B and RCG Corp).
The NAB survey showed the construction sector had the greatest confidence in May, possibly reflecting the rise in residential building, or the strong emphasis on infrastructure spending in the budget.
Mining was the only industry with negative confidence levels, which is understandable given the fall in prices for commodities such as iron ore and coal.
The NAB said employment and profits were at steady to softer levels.
"Conditions are mixed across industries, but are generally negative outside of services: ‘bellwether’ sectors (wholesale, transport) still soft, but forward orders bounced-back from last month’s drop.
"Inflation pressures muted, including lower retail prices, allowing the RBA to maintain accommodative policy. NAB forecasts marginally higher with unemployment to reach 6.25% by late 2014.
"Business confidence was unchanged in the month, at around long run average levels. Some leading indicators from the survey improved (especially new orders), but generally remain soft.
"However capital spending plans remain subdued and capacity utilisation broadly unchanged at relatively low levels," the NAB said.
The fall in job ads was sharp – a drop of 5.6% in May compared to rises of 2.2% in April and 1.2% in March.
The ANZ said the fall signals a sudden weakening in the demand for labour coincides with a 12% decline in consumer confidence for the month, according to research from ANZ-Roy Morgan.
ANZ attributed the decline in confidence and job advertising to the tough federal budget.
"The key question now is whether the fall in job ads is largely temporary," ANZ senior economist Justin Fabo said in a statement with the figures.
"If it isn’t, this will be a risk to our forecast that labour demand will improve slowly this year amid modestly better economic conditions, with the unemployment rate expected to remain close to 6 per cent for some time,” he said.
Internet job ads fell 6%, while newspaper Job ads were down in many states, with only small rises seen in NSW, the Northern Territory and South Australia. Newspaper ads were up 7.2% but the ANZ reckons that was a statistical reaction to the sharp fall in April.
And the April housing finance figures provided further evidence the property market is cooling.
We’ve already had weak building approvals for April and a fall last month in prices in most capital cities, led by Sydney and Melbourne.
The Australian Bureau of Statistics figures showed home loan approval numbers were flat in April, short of the 0.2% rise the market had expected.
The value of total housing finance rose 1.7% in April, seasonally adjusted, to $27.89 billion.
The ABS said there were 52,109 approvals in the month, compared to 52,104 approvals in March.
