Business confidence has hit its highest point since October 2003, according to NAB’s August survey of business confidence and conditions.
Business confidence jumped a further 8 points to an overall reading of +18 points, putting it well above long-term average levels. NAB says that while the improvement in confidence was seen throughout the economy, the retail, finance, manufacturing and recreational and personal services sectors were most upbeat.
NAB’s chief economist Alan Oster has been quick to point out that the survey was actually taken before the RBA left rates on hold last week and before better-than-expected growth figures were released – two pieces of data that could have pushed confidence even higher.
“Confidence levels are at similar levels everywhere,” Oster says. “It is quite remarkable that a sector like manufacturing is now more confident – albeit marginally – than any other sector.”
But he has suggested that the current confidence levels may be starting to become unrealistic, just as businesses became overly pessimistic earlier in the year.
“Certainly the gap between confidence and actual business outcomes (and indeed business intentions for capital expenditure) points in that direction,” Oster says.
Other concerns including weaker readings around forward orders and employment, which may suggest while business owners are feeling good, they are still nervous about actually ramping up their operations just yet.
Shares move higher
The Australian sharemarket has enjoyed a bright start to the day, with the benchmark ASX-S&P 200 index up 42.3 points or 0.9% to be at 4496.7 at 11:55 AEST.
All of the major stocks did well, with NAB (up 2.6% to $28.02) and AMP (up 2% to $6.22) leading the way. ANZ, Commonwealth Bank and Westpac were all up by 1% or more in morning trade.
The Australian dollar continued its upward march, opening this morning at US85.6c.
The big corporate news of the morning came from Suncorp, which launched a $750 million bond offer. NAB announced last night it held a 7% stake in the banking and insurance company, although is says the stake was held on behalf of private investors.
Meanwhile, Melbourne-based toll road operator ConnectEast Group says it will defend a legal claim from Leighton Holdings. The construction giant says it has lost money on its deal with the toll road operator because traffic levels were not as good as expected.
Kraft bid dominates overseas markets
With US equity markets closed overnight for the Labour Day holiday, all eyes turned to London, where chocolate giant Cadbury rejected a $19 billion takeover bid from Kraft.
The pan-European FTSEurofirst 300 index of top shares rose 1.4% to 975.90 points, leaving it just under an 11-month closing high.
In other overseas news, the price of gold hit $US1,000 an ounce for the first time since February as investors continue to dump the US dollar.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
