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Australia business conditions near decade highs, confidence jumps
February 14, 2017 / 12:40 AM / 7 months ago

Australia business conditions near decade highs, confidence jumps

SYDNEY (Reuters) - Australian business conditions jumped to their highest in nearly a decade in January as firms reported a pick up in sales while profits steadied, pointing to solid economic growth after a soft patch late last year.

The data is among the latest in a string of surveys that show the A$1.6 trillion economy is humming along, cementing views the central bank will stand pat on interest rates after easing twice last year.

National Australia Bank’s (NAB.AX) monthly survey of more than 400 firms showed its index of business conditions jumped 6 points to +16 in January. That took it back to the highs seen in mid-2007 and well above the long run average of +5.

The survey’s measure of business confidence also climbed 4 points to +10 in January.

Its index of sales doubled to +22 for the month, while the measure of profits was steady at +12. A healthy 5 point rise in employment to its highest since 2011 seemed to bode well for the generally tardy labor market.

Cost price measures in the survey also lifted notably, suggesting a build up in wage pressures, although retail price inflation remained very subdued.

New South Wales enjoyed the bulk of the improvement in conditions, while other states were relatively stable.

NAB Chief Economist Alan Oster was circumspect about reading too much into the survey, reflecting in part the bank’s view that a slowdown in the economy will force two more cuts in interest rates later in 2017.

“Recent strength in the NAB Business Survey is consistent with an anticipated rebound in economic activity. With that said, a confluence of seasonal factors suggests it is unwise to get too carried away with the result just yet, especially as some key industries remain fairly weak.”

“The trend for retail is still very soft, which suggests the outlook for consumption remains cloudy,” Oster added.

The Reserve Bank of Australia (RBA) held rates steady this month and painted an optimistic picture for the next couple of years, predicting solid economic growth, further expansion in resource exports and a welcome pick-up in inflation.

Reporting by Swati Pandey; Editing by Eric Meijer

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