You are here

Australia business conditions stay strong in Oct: NAB

NAB.jpg
Australian business conditions stayed strong in October with sales, profits and employment all in positive territory, though confidence faded a little in the face of financial market volatility and concerns over emerging markets.

[SYDNEY] Australian business conditions stayed strong in October with sales, profits and employment all in positive territory, though confidence faded a little in the face of financial market volatility and concerns over emerging markets.

National Australia Bank's monthly survey of more than 400 firms showed its index of business conditions held at an above-average +9 in October, even as confidence eased back 3 points to +2.

"Business confidence remains somewhat fickle, despite persistent strength in business conditions," said NAB's chief economist Alan Oster. "The business survey still points to a reasonably resilient recovery in the non-mining sector," he added. "Service sectors continue to report more favourable conditions than other industries." The better trend in business conditions was one reason the Reserve Bank of Australia (RBA) skipped a chance to cut interest rates this month.

A separate survey of consumers from ANZ and Roy Morgan showed confidence rising to the highest since January 2014 as people became more upbeat on the economic outlook.

Some of this improvement has been attributed to the popularity of newly installed Prime Minister Malcolm Turnbull, who ousted predecessor Tony Abbott in a Liberal party leadership challenge in September.

NAB's survey of businesses showed the outperformance of sectors most exposed to a weaker Australian dollar and record-low interest rates.

The survey's index of sales picked up a point to an historically high +15 while profitability lost a point to +8.

Encouragingly for the labour market, the index of employment held at a firm +3 in October, matching its highest since 2011.

Mr Oster said the index pointed to stronger momentum ahead with annual job creation perhaps around 200,000.

The outlook for non-mining business investment remained positive with that index dipping only a point to +6 and above its long run average.

Capacity utilisation ticked up to 81.4 per cent, its highest since early 2012. "Capacity utilisation increased further this month, which bodes well for business investment and the labour market," said Mr Oster.

REUTERS