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Mining is the nation’s most confident industry right now, says NAB
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There’s more evidence that Australia’s mining sector is gathering momentum in NAB’s latest business survey for September.
The September data — released on Tuesday — shows business conditions edged higher while confidence towards the general outlook held steady after falling in August.
Most importantly for ASX small cap investors, the NAB data clearly shows Australia’s mining sector has consolidated its recent gains.
“Confidence (in trend terms) remains highest in mining with most other industries at around the average of national conditions,” said NAB’s chief economist Alan Oster in the report.
“By industry, mining again is reporting the strongest outcomes and confidence.”
That’s been the case throughout 2018, although the mining readings have declined from their May highs.
However, there was a clear pick-up in September for both mining conditions:
And confidence:
NAB also looked at capacity utilisation as one of its key themes for the month.
The measure “reflects both the current demand for a firms output as well as the results of past investment decisions”, NAB said.
It’s an important variable both the demand for products, as well as a company’s ability to boost production if needed.
And the mining sector leads the way on that front too:
“Capacity utilisation is highest in mining, where rates are around 4 per cent above average for that industry,” NAB said.
“This is unsurprising given the strength in demand for the sector’s output over the last decade, which spurred a large investment boom.”
The results of the business survey align with recent NAB research on the ground in WA,which showed upward pressure on wages in specific mining regions along with a big pipeline of new investment projects.
Within the major sub-indexes, trading and profitability held steady but there was a notable pick-up in the employment reading.
“The employment index continues to suggest growth in employment of over 20,000 per month over the next six months,” said NAB chief economist Alan Oster.
Assuming a steady participation rate, “we should see further declines in the unemployment rate over the rest of 2018 and into 2019”.
That represents a slightly more optimistic view than the RBA’s most recent set of projections, which forecast the unemployment rate will stay at around 5.5% by the end of this year.
This article first appeared on Business Insider Australia, Australia’s most popular business news website. Read the original article. Follow Business Insider on Facebook or Twitter.
