Australia business conditions ease, confidence up: survey

[SYDNEY] Australian business conditions eased a little in the third quarter as sales and profits waned, yet firms still turned more confident on the outlook for activity and employment, a survey showed on Thursday.

National Australia Bank's quarterly survey of more than 920 firms showed its index of business conditions fell 4 points to +7 in the third quarter, though that remained above its long-run average. The monthly version of this survey showed weakness in July but a recovery in September.

Its business confidence index rose 2 points to +5 and firms were more optimistic on the outlook for the next 12 months.

The measure of employment ticked up a point to +3 and forward orders improved to +4, a promising sign for labour demand.

"Leading indicators were once again encouraging and remain consistent with NAB's expectation for activity in the non-mining economy to be solid in the near-term," said NAB's head of Australian economics, Riki Polygenis. "Capex plans for the next 12 months are solid, while both near-term and longer-term employment intentions improved. Firms are also starting to report difficulty finding suitable labour."

However, the survey also found producer and retail prices barely grew in the quarter, suggesting the official inflation report for the third quarter due on Oct 26 may also be soft.

The Reserve Bank of Australia (RBA) this week highlighted the importance of the inflation report for its next monetary policy meeting in November.

It was surprisingly low readings for inflation that prompted the central bank to cut rates in both August and May.

"The CPI outcome is expected to have an influence on the RBA's decision whether or not to cut interest rates again this year, although barring an extremely weak result, our expectation is for the RBA to remain on hold for now," said Mr Polygenis.

REUTERS