Australia’s July business conditions improve, sentiment fragile

[SYDNEY] Australian business conditions improved marginally in July while confidence remained fragile, a survey showed on Tuesday (Aug 11), with firms citing cost pressures even as renewed tensions in the Gulf were sending oil prices higher again.

The survey from National Australia Bank showed its index of business conditions rose 1 point to +4 in July, but stayed below the long-run trend of +7. Confidence was stuck at -6, well below the level held in February before the US-Israeli war on Iran began.

“Despite improved outcomes relative to those seen at the peak of the impact of the Middle East crisis, the survey shows that the elevated uncertainty has continued to weigh on business confidence,” NAB said.

“Cost pressures amid a softer forward demand outlook suggest continued pressure on margins.”

Reflecting swings in fuel prices, the transport and utilities industry was a key driver of a rise in both final prices and purchase costs, NAB noted.

The Reserve Bank of Australia meets on Tuesday and is widely expected to hold interest rates steady at 4.35 per cent, following three hikes this year. Policymakers have warned rates might have to rise further should inflation not cool as hoped.

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The survey’s measures of employment and profitability picked up in July, while sales were steady. Firms reported a sharp rise in capacity utilisation to 83 per cent, driven largely by the finance, business and property and wholesale industries. REUTERS