Australia NAB Business Conditions Ease; Confidence Improves

(RTTNews) - Australian business conditions eased in May amid ongoing profitability pressures and soft demand, while business confidence improved from the last month, survey data from NAB showed on Tuesday.

A monthly survey conducted by Westpac showed that consumer confidence rose moderately in June, underpinned by interest rate cut and softening inflation. The business confidence index rose to 2 in May from -1 in April. Meanwhile, the business conditions indicator dropped to zero from 2 in the previous month.

The NAB said the fall in business conditions over recent quarters helped to narrow the gap between business confidence and business conditions.

"Overall, business conditions remain weak," NAB Chief Economist Sally Auld said. "If this continues in coming months, it will be difficult for confidence to rise from current levels."

"We will watch whether there is a more sustained softening in labor demand, with the employment index easing to below average levels," added Auld.

The survey showed that confidence strengthened in all industries except manufacturing, mining and wholesale.

Due to the fall in employment, business conditions eased by one point. The profitability index remained negative at -4 and trading weakened to +5 index points. Capacity utilization rose to 82.3 percent from 81.4 percent in the prior month, partially reversing the large decline seen in April.

Price indicators were mixed in May. Labor costs growth was strong at 1.7 percent in quarterly equivalent terms, while purchase costs growth eased to 1.1 percent, as did final product price growth, at 0.5 percent. In contrast, retail price growth held steady at 1.2 percent in May.

The Westpac-Melbourne Institute Consumer Sentiment Index rose 0.5 percent to 92.6 in June from 92.1 in May.

Reserve Bank of Australia's May interest rate cut together with moderating inflation are providing significant boosts, particularly around buyer attitudes towards major purchases, the survey showed.

However, more sluggish economic growth and the unsettled situation around global trade are continuing to weigh heavily on expectations, Westpac said.