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Australian business activity improves modestly in Oct: survey

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A closely watched measure of Australian business conditions edged higher in October as firms reported a much-needed pick up in sales, offering a hint of stabilisation after months of weakness.

[SYDNEY] A closely watched measure of Australian business conditions edged higher in October as firms reported a much-needed pick up in sales, offering a hint of stabilisation after months of weakness.

National Australia Bank's index of business conditions inched up one point to +3 in October, but remains under the long-run average of +6. The survey's volatile measure of business confidence bounced two points to +2.

The index of sales rose three points to +7, while employment held at +4.

"This month's survey results continue to point to only modest outcomes in the business sector, though forward-looking indicators have improved slightly and may be pointing to a stabilisation in conditions," NAB group chief economist Alan Oster said.

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"Acknowledging that the impact of recent rate cuts will take time to flow through the economy, it appears that the support provided by both fiscal and monetary policy this year has done little to offset the slowdown in the business sector."

Australia's A$1.95 trillion (S$1.78 trillion) economy has dodged recession since the early 1990s but has now hit a soft patch, with sluggish consumer spending and lacklustre wage growth leading to a broader slowdown.

The Reserve Bank of Australia responded by slashing interest rates three times to a record low 0.75 per cent. Financial futures are leaning toward one more 25-basis-point cut by the middle of next year.

The conservative government of Prime Minister Scott Morrison also launched a round of tax rebates in July, though households seem to have saved much of the cash rather than spend it.

Some leading indicators in the NAB survey improved in September, with forward orders, historically the most reliable indicator of domestic demand, rising to +3, from -2.

Measures of inflation showed a sharp rise in retail prices in October amid signs firms were passing on higher import costs stemming from a soft Australian dollar.

REUTERS