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Australia business conditions lacklustre in Jan: survey

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A measure of Australian business conditions stayed subdued in January as manufacturers reported tough times, though a falling currency helped nudge confidence higher.

[SYDNEY] A measure of Australian business conditions stayed subdued in January as manufacturers reported tough times, though a falling currency helped nudge confidence higher.

National Australia Bank's monthly survey of more than 400 firms showed its index of business conditions held at +2 in January, as December's reading was revised down from +4.

The survey's measure of business confidence ticked up a point to +3, with miners encouraged by the lower local dollar.

Its index of sales fell 4 points to +5, while profitability eased a point to +1 and employment stayed at -1.

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The survey was conducted before the Reserve Bank of Australia (RBA) cut interest rates to a record low of 2.25 percent last week, which might give a fillip to sentiment going forward.

Financial markets are pricing in a further easing to 2 per cent by June, with a decent chance it could come as early as next month. "Our view is that the RBA will sit back and watch for a few months to see if more needs to be done," said NAB's chief economist Alan Oster. "Fundamentally we still see the need for another cut to counter lower commodity prices and other domestic headwinds. We have brought forward our August cut to May, with a 30 percent probability of another cut thereafter." The survey showed some improvement in the outlook for business investment where the index rose a point to +5, so matching its long run average.

Inflationary pressures were restrained with firms reporting more spare capacity and slow wages growth. Input prices were nudged higher by rising import costs, but prices at the retail level were unchanged in the three months to January.

REUTERS

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