Flood hits economy
AUSTRALIA’S e c o n o mi c growth will suffer in the first quarter of 2011, as business conditions only partly recover from the Queensland floods, a survey shows.
National Australia Bank ( NAB) also warns in its monthly business survey that there’s an ‘‘ evident’’ multi-speed economy.
The NAB survey for February showed business conditions rose moderately to minus 2, from minus six, to remain below the zero level t hat separates expansion from contraction.
However, business confidence rose 10 index points, to 14 points in the month.
‘‘ The multi-speed economy is again very evident,’’ NAB s ai d i n a s t at ement accompanying the survey yesterday.
‘‘ Although mining is getting back to normal and recreation is doing well, a brace of domestically focused industries continues to suffer – retail, wholesale, construction and manufacturing.
‘‘ Conditions have softened in WA ( Western Australia) and SA ( South Australia), and remain poor in Tasmania – NSW now has the strongest conditions.’’
The bank also said the March quarter would ‘‘ stall’’ due to the devastating floods.
The survey showed orders remained weak and, despite rebuilding of mining stocks, stocks declined.
The capacity use rate was flat at 81.1 per cent.
The survey also implies annualised domestic demand slowing two per cent in the six months to March.
NAB said soft underlying inflation and economic con- ditions had caused the bank to reassess its forecast for movements in the cash rate.
The bank says the Reserve Bank of Australia ( RBA) will lift the cash rate from 4.75 to five per cent in August, instead of May as predicted.
‘‘ The risk of an earlier or larger rate adjustment lies with faster growth and especially any sign of wage pressures.’’
In a similar private survey yesterday, Dun & Bradstreet found persistent consumer caution drove second quarter business sales expec- tations to their lowest level in 19 months.
The latest D& B business expectations survey showed sales were down 14 points to an index level of 17 for the June quarter.
The result is the lowest of the past seven quarters, but still four points above the 10-year average.
The survey of business executives, conducted i n February, also showed profit expectations fell four points to 13, still well above the 10-year average index of six points.