Mixed signals on economy

Business confidence has risen to a 3-year high, extending the lift in sentiment seen after the federal election, but conditions remained poor in a reflection of the economy's below-trend growth.

Business confidence has risen to a 3-year high, extending the lift in sentiment seen after the federal election, but conditions remained poor in a reflection of the economy's below-trend growth.

The upturn in sentiment had yet to translate into a similarly significant lift in business activity, while employment conditions stayed soft and pointed to continued weakness in the labour market, the National Australia Bank's monthly survey released on Tuesday found.

The business confidence index rose to 12 points in September, from four in August and minus five in July. Business conditions were minus four last month, up from minus seven in July and August.

"The pick-up in the confidence numbers are very welcome, but the actual business conditions still point to the pressure on labour market outcomes, because business profitability doesn't appear to be improving at all," Commonwealth Bank senior economist Michael Workman said.

The figures came as a monthly ANZ survey also released on Tuesday showed job advertisements rose for the first time in seven months, although they were still 15 per cent lower than a year ago. Tentative signs of improving economic indicators, including a strengthening housing market, saw the Reserve Bank shift to a wait-and-see mode at its October board meeting last week.

The RBA's move led some economists to rethink expectations of interest rate cuts, with NAB, ANZ and Westpac delaying forecasts for the next cut to next February.

Even so, economists said they expected the jobless rate to remain at a four-year high of 5.8 per cent when September labour force figures are released on Thursday. They said the economy needed a sustained rise in business confidence and consumer sentiment, as well as a further fall in the dollar to support export-oriented businesses, to lift above its below-trend pace of growth.

Analysts are also looking for another month of strengthening consumer sentiment figures, to be released on Wednesday, after a 3.5 per cent rise in August.

The finance, business, property and construction sectors had big gains in business conditions, possibly driven by the housing market amid a low-interest-rate environment, NAB chief economist Alan Oster said. But "activity remained worryingly weak in mining and manufacturing, while conditions in transport and utilities recently turned down to very poor levels".

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