NAB (ASX:NAB) share price lifts despite recession warning

With half the nation in and out of lockdowns, the economic pain is mounting.
The post NAB (ASX:NAB) share price lifts despite recession warning appeared first on The Motley Fool Australia. –

The National Australia Bank Ltd (ASX: NAB) sounded the alarm today on Australia potentially entering a recession this year.

The NAB share price appears unfazed by the forecast, currently up 1.27% to $27.03 in intraday trading.

What’s this about a second recession?

Until the COVID-19 pandemic struck in early 2020, Australia had enjoyed a world-beating run of almost 30 years without a recession.

A recession, if you’re not familiar, is when a nation’s GDP falls 2 or more quarters in a row.

Australia’s enviable growth run ended last year when lockdowns shuttered much of the business activity and GDP slipped in both the March and June quarters.

While economists are widely forecasting that GDP will retrace in the current (September) quarter, most analysts – including those at the Reserve Bank of Australia (RBA) – are expecting to see some growth for the 3 months ending 30 June.

The economics team at NAB isn’t convinced.

As the Australian Financial Review reports, the bank had been forecasting a 0.4% increase in GDP for the June quarter. That includes “a small detraction of 0.2 percentage points due to Australia’s balance of trade”.

Now, however, NAB’s director of economics and markets Tapas Strickland believes that detraction will be between 1.0–1.9%. And if that loss isn’t “made up elsewhere, [it] could see Q2 GDP flat or even potentially negative,” according to Strickland.

Noting the risk, Strickland said:

NAB is currently characterising it as a risk given we haven’t seen many other GDP partials to date. With Q3 already likely to be deeply negative, it does raise the potential for the ‘R’ word even before we get to Q4.

The bank’s gloomier forecast is based on falling export volumes in the June quarter, mostly iron ore, Australia’s top export earner. Which, as the AFR notes, NAB believes probably won’t be offset by increased inventories. That’s because production caused the slowdown, not shipping.

Whether the RBA has this one right or NAB, Australians will likely be eagerly eyeing an end to lockdowns with hopes the December quarter will see a return to growth.

NAB share price snapshot

NAB’s share price gained 54% over the past 12 months. That’s more than twice the 24% increase posted by the S&P/ASX 200 Index (ASX: XJO).

Year-to-date the NAB share price has continued its strong performance, up 18% in 2021.

The post NAB (ASX:NAB) share price lifts despite recession warning appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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