By Third Party, 14 October 2010
Page last updated at 3:58 PM 14-10-2010
Business confidence is down; conditions are up – but broadly, little has changed. The NAB business confidence index eased from 11.2 to 10.1 in September. The business conditions index rose from +4.5 in August to +6.7 in September – only the second rise in six months.
Deflationary pressures have emerged. According to the NAB survey, retail prices fell at a 0.2 per cent quarterly rate in September. NAB notes that margins are under pressure while a firmer currency is keeping prices down.
Credit card balances fell for second straight month. The average credit card balance stood at a $3253.70 in August, down $14.80 on July. The average credit card balance is up just 3.8 per cent on a year earlier – the slowest annual growth in six months.
What does it all mean?
Corporate Australia is largely treading water with confidence levels and overall operating conditions best described as good, but not great. And it’s not just the vagaries of the global economy that businesses have to cope with but it’s also deflation. Consumers aren’t keen to spend, putting margins under pressure and causing retail prices to fall. While the environment is great news for conservative consumers, it represents more challenging times for Corporate Australia.
While business conditions are flat and prices are falling, the other concern is that businesses are more circumspect about lifting staffing levels with the employment index falling to the weakest level in a year. Looking forward, retailers should benefit from the strength of the Australian dollar, allowing profit pressures to ease.
Aussie consumer remains ultra-cautious. The average credit card balance has been cut for the second straight month and consumers increasingly prefer to use their own cash to make purchases than put it on credit. Credit card debt is only 3.8 per cent higher than a year ago, just keeping pace with wage growth.
What do the figures show?
National Australia Bank Business Survey
The National Australia Bank business confidence index fell for the sixth time in seven months, easing from 11.2 to 10.1 in September.
The business conditions index rose for only the second time in six months, lifting from 4.5 to 6.7 in September.
The index of trading conditions rose from 5.3 to 12.9; profitability improved from 3.8 to 6.2; employment fell from 2.5 to a 12-month low of 1.9; and forward orders lifted from -6.2 to 3.2.
The monthly reading of labour costs softened for the second straight month, easing from 1.3 per cent to 1.1 per cent in September. But NAB noted that annual growth of labour costs stand at 6 per cent, underpinned by mining. But wages are weakest in retail and manufacturing sectors.
Inflationary pressures are well contained “as a result of margins being under pressure and the effects of a rising AUD”. Retail prices fell at a 0.2 per cent annual rate in September. Purchase costs and final product prices rose by 0.3 per cent at a quarterly rate.
Overall, 43 per cent of businesses say that they don’t require credit (finance) at present.
Capacity utilisation rose slightly from 81.2 per cent to 81.6 percent in September, thus holding in line with the long-term average.
Credit and debit card activity
Figures released from the Reserve Bank show that the average credit card balance stood at $3253.70 in August, down $14.80 on July. The average credit card balance is up 3.8 per cent on a year earlier – the slowest annual growth in six months. And growth of a smoothed measure of credit card debt – the rolling 12-month average – eased from five per cent to 4.6 per cent in the month.
Of credit cards attracting interest charges, the average outstanding balance rose by $8 in August after falling $21 in July. The average balance accruing interest stands at $2396.80, up 5.8 per cent on a year ago but only up 3.5 per cent on a “smoothed” basis.
The number of credit card cash advances in July was down 3.5 per cent on a year earlier. Credit card advances have been largely falling in annual terms for around four years.
The number of purchases made on credit cards rose by 2.8 per cent in August to stand 9.5 per cent higher than a year earlier. The number of purchases made on debit cards rose by 1.9 per cent in August to stand 15.2 per cent higher than a year ago.
The number of just EFTPOS transactions in August (excludes cash out) rose by 2.1 per cent to stand 16.7 per cent higher than a year ago.
The value of cash withdrawn from ATMs in August continued to fall in annual terms. The value of cash withdrawn was down 0.4 per cent on a year ago – the 13th annual decline.
What is the importance of the economic data?
The monthly National Australia Bank business survey is valuable in providing a timely reading on the health of Corporate Australia. Key indicators of business conditions such as orders, employment, profitability and capacity use are covered together with a gauge on confidence levels.
The Reserve Bank releases data on credit and debit card transactions each month. The credit card figures are useful in highlighting consumer borrowing and spending trends.
What are the implications for interest rates and investors?
The frequency of the rate hikes earlier this year did take its toll on the household budget.
However, given that the Reserve Bank has remained on the interest rate sidelines for the past five months, there are tentative signs that conservatism is now thawing.
EFTPOS transactions are almost 17 per cent higher than a year ago. And CommSec expects consumers to continue using existing cash facilities, rather than taking on additional debt.
Sourced from switzer.com.au
If you're looking for a balance transfer, low interest rate or a reward credit card then please visit our credit card comparison homepage.