Australian business conditions solid but retail is a concern

Australian business conditions solid but retail is a concern
Australian business conditions have picked up since their fall last month and are now holding at levels just a little below the peaks experienced prior to the GFC.

The latest National Australia Bank business survey has them holding steady at +14 index points, well above the long-run average of +5.

Business confidence has edged up too, rising 2 points to +7, following the sharp deterioration last month.

The construction industry is leading the way for business conditions thanks to a large backlog of housing work across Sydney, Melbourne and Brisbane and publicly funded infrastructure projects. It had the highest reading although other sectors weren’t far behind.

“Business conditions at these levels tell us that the business sector in Australia is doing very well. We have certainly seen that reflected to some degree in areas like corporate profits and jobs growth, but other aspects of the economy – such as business investment – have been somewhat disappointing in comparison. In that context, it will be important to keep an eye on the recent softer trend in business confidence,” NAB chief economist Alan Oster said.

The big concern however was retail with conditions in negative territory and trending lower.

“The sustained weakness in retail conditions should justifiably be raising doubts around expectations for any imminent and sustained rebound in consumer spending, although tough competition and other margin pressures are likely behind the result as well” Mr Oster said.

 



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