Business confidence hits five month high

Simone Ziaziaris
(Australian Associated Press)

 

A bounce in business confidence has narrowed the gap between sentiment and business conditions, National Australia Bank says.

The lender’s December business survey shows business conditions remained steady and well above the long-run average, and a stronger global economic backdrop drove confidence to its highest level since July 2017.

NAB chief economist Alan Oster said the business conditions and confidence are now in line, after being divided over the past couple of years, which is an “encouraging signal” for investment.

“That said, while business conditions have held at a high level through 2017, they have tended to outperform measures of activity in the national accounts in recent times,” Mr Oster said in a statement.

Sales and profitability improved in December, while employment conditions eased.

The employment index suggests a slowdown in jobs growth to around 240,000 per annum over the next six months, Mr Oster said.

“While suggesting some pull back in employment growth, this should still be sufficient to see the unemployment rate inch downwards, assuming no further large increase in the participation rate,” he said.

An interest rate hike by the Reserve Bank is unlikely unless employment and wages improve further and the property market holds steady, Mr Oster said.

The survey found strong business conditions were evident across all major industry groups, with the exception of retail, which recorded weaker business conditions but improved confidence.

The construction industry was boosted by a large pipeline of residential construction and stronger non-residential building approvals, while mining – previously a major drag on the overall index – also recorded above average business conditions.

Mining and construction were also the most confident sectors.

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