Australia business confidence jumps to 1-1/2 year highs

SYDNEY, Nov 10 (Reuters) - A measure of Australian business confidence jumped to the highest since mid-2019 in October, though the employment index and forward orders stayed in negative territory, suggesting monetary policy will remain stimulatory for some while yet.

National Australia Bank’s index of business confidence jumped 9 points in October to +5, while conditions edged up 1 point to +1.

The conditions index has come a long way since hitting a trough of -34 in April at the height of the coronavirus pandemic though it is still nowhere close to the long-run average of +6.

“The survey continues to show that the economy has rebounded from the sharp fall in activity in H1 2020 and will likely continue to recover as the economy reopens,” NAB said.

“The improvement in confidence is encouraging but remains fragile, and it will likely remain that way until a (COVID-19) vaccine is available.”

The improvement in conditions was driven by a rise in all three sub-components, with trading and profitability firmly in positive territory.

The employment index stayed negative, suggesting businesses were not yet ready to add new positions.

Forward orders rose to -4 while capacity utilisation jumped to 77.9%.

The survey was conducted in the last week of October – around the time of the announcements of re-opening in Victoria state following weeks of coronavirus-driven lockdowns.

Both confidence and conditions saw a notable improvement in the state. (Reporting by Swati Pandey; Editing by Kim Coghill)