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The major bank’s monthly survey points to pockets of resilience throughout the economy amid easing price and cost pressures.
National Australia Bank’s (NAB) Monthly Business Survey for October 2024 has revealed a “sharp rise” in business confidence, marking the index’s return to its highest level since early 2023.
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Business confidence rose 7pts to 5 index points, according to the seasonally adjusted survey of more than 250 firms across the non-farm business sector, a sharp increase on the readings for September 2024 (-2 index points) and August 2024 (-4 index points).
This reading represents the highest level of business confidence recorded by the monthly survey since January 2023 (+6 index points).
The survey pointed to signs of confidence across most industries, with construction (down 8 pts) and retail (down 2 pts) proving the exception.
NAB’s report also showed business conditions remained unchanged overall month on month (+7 index points).
However, there was some divergence within the subcomponents of business conditions, with trading conditions up 1pt to (+13 index points), profitability flat (+5 index points), and employment down 2pt (+3 index points), when compared with September 2024 readings.
Across the country, conditions declined in Queensland (down 3 pts) and Victoria (down 1 pt), but rose in all other states.
Despite this, Queensland remained the state with the highest reading for business conditions (+16 index points), followed by NSW (+7 index points) and Western Australia (+7 index points).
Gareth Spence, NAB head of Australian economics, said that while it was important to remember that these readings represented just one month of data, the spike in confidence is an encouraging sign.
“Conditions continue to track at around average,” said Spence. “Therefore, while we know growth has slowed to its slowest rate in around 30 years over the year to June, excluding COVID lockdown periods, the business survey continues to tell us that activity has held up.”
Spence also indicated the major bank is keen to see how these metrics track in future readings of the survey.
“We continue to watch the survey closely – not just for the forward looking and activity indicators, but also capacity utilisation which will be key in the evolution in price pressures for the economy,” said Spence.
“The survey, like other price indicators, continues to suggest an ongoing gradual easing in inflation pressure, but also that there is still some way to go in the inflation moderation when we look at the consumer facing components.”
Signs of positivity
These latest findings represent an uptick on confidence and consumer levels observed in The Adviser’s recent Commercial Lending supplement, highlighting signs of business resilience.
In a cash flow finance feature, Jon Sutton, CEO of non-bank lender ScotPac, said brokers have an important role to play in making the most of these opportunities with products and solutions, with a particular emphasis on small and medium-sized enterprises.
“We have some very large, extraordinarily large companies in the economy. But the real blood flow of the Australian economy is down to the small-business owners that are supporting industry across the various sectors of the economy,” Sutton said.
“We really need the SME sector to be firing on all cylinders.”
Areas of opportunity
Speaking on The Adviser’s In Focus podcast, Roberto Sanz, Prospa’s general manager, sales and distribution, spoke about lingering challenges facing Australian businesses and how the broker channel can provide support.
“I would say that demand has been pretty steady all throughout 2024,” Sanz said.
“However, I would point out we’ve seen [both] an increase in business quality and a deterioration of business quality. So we have to really analyse where that demand is really coming from. Is it from businesses that are healthy and we’re funding new opportunities?
“At the end of the day, not all businesses fall within the same bracket. We have to also acknowledge that businesses are having a tougher time and we see a deterioration in business quality as well.”
Listen to the full podcast here.
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