Strength in the services sector and an improved outlook for the mining industry have helped lift business conditions to their highest level since the global financial crisis in 2008, a new survey shows.
Despite the uplift in conditions, however, the NAB Monthly Business Survey for March shows that business confidence has fallen and remains below the peaks of recent years.
NAB chief economist Alan Oster said the bounce in business conditions was a little surprising given the disruption caused by Cyclone Debbie in Queensland in late March.
“Even so, conditions have improved almost across the board to levels that suggest a strong economy in the near term,” Mr Oster said in a statement on Tuesday.
“That includes WA, which has been looking better of late and suggests the worst of the mining downturn may be behind us.”
NAB said it was unclear why there was a divergence between business conditions and business confidence, but suggested it could be a result of global political uncertainty or longer-term domestic uncertainty.
The survey’s measure of business conditions jumped to 14 points in March, up from nine points in February and well above the long-run average of five points.
Business confidence eased to six points in March, from seven points in February, although it was still in line with the long-term average.
Mr Oster said the March survey results were consistent with NAB’s forecast for economic growth to accelerate in the second half of 2017.
However, the longer-term outlook was one of caution because growth drivers such as LNG exports, commodity prices and housing construction would begin to fade.
The March survey showed that the improvement in business conditions was primarily driven by the major services and wholesale sectors.
But the mining sector was also impressive, having benefited from higher commodity prices and an improved outlook for global demand.
On the other hand, business conditions in the retail sector continued to deteriorate, which made the outlook for consumption “downbeat”.
The improvement in business conditions was mostly driven by higher sales, with other components, such as employment, flat and profitability modestly higher.
NAB said the stable measurement of employment suggested a healthier labour market than official data from the Australian Bureau of Statistics.