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Australia business confidence eases back in July: survey

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National Australia Bank's monthly survey of more than 400 firms showed its index of business confidence slipped 4 points to +4 in July.

[SYDNEY] Australian business confidence eased back in July as mining and construction firms turned more cautious, though both sales and profits remained relatively healthy according to a survey out on Tuesday.

National Australia Bank's monthly survey of more than 400 firms showed its index of business confidence slipped 4 points to +4 in July. Its measure of business conditions also dipped 4 points to +6. "Much of the change stemmed from mining and construction firms, suggesting an escalation in Chinese growth concerns could be putting firms on alert," said NAB's chief economist Alan Oster.

The pullback would be sobering news for the Reserve Bank of Australia (RBA) which had recently made much of the pick-up in business confidence as one argument against the need for further cuts in interest rates.

Still, Mr Oster noted trend measures of conditions and confidence still pointed to a turnaround in the non-mining economy. "Both trading conditions and profitability remain relatively elevated," he said. "Conditions vary greatly across industries, but the service sectors continue to outperform." The survey's index of sales eased back to +11, from a very strong +19 in June, while profitability dropped 3 points to +7. Forward orders fell 3 points to +2, while the index of employment eased back into negative territory at -1.

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The capital expenditure index eased a point to +6 index, but remained above its long-run average. Oster said trend growth in the index was still close to its highest since the global financial crisis, holding out hope for a stronger expansion in non-mining investment.

There was little sign of inflationary pressure in the survey with labour costs especially subdued.

REUTERS

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