Australian firms growing less concerned about economic disruptions, though conditions remain below average
Business confidence rose sharply in June as fears over the economic impact of Middle East tensions proved less severe than anticipated, the latest NAB Monthly Business Survey shows.
Confidence climbed nine points to -5 index points, while business conditions held steady at +3 index points for a third successive month.
Business confidence and conditions, SA (net balance)
Seasonally adjusted index points
Source: NAB Monthly Business Survey
"Business confidence has now recovered much of the sharp decline we saw in March, reflecting some easing of concerns around energy markets and as broader geopolitical risks have tempered," said NAB chief economist Sally Auld (pictured right).
"Conditions have also stabilised, suggesting that while growth has slowed, activity hasn't fallen away. That said, the picture is a little softer with conditions and capacity utilisation now at levels below where they started the year.
"The picture that emerges is one of an economy that is slowing, but not as sharply as many had feared a few months ago."
The survey indicated a lower-than-expected inflation impact from the Middle East conflict, with purchase cost growth well down from its March peak, final prices slowing and retail prices declining for the first time in seven years.
Employment eased slightly while profitability improved and trading conditions remained broadly flat. Capacity utilisation held steady at 82.0%.
"From an inflation perspective, the survey is encouraging. The March cost growth spike has largely unwound and price growth has moderated across most industries," Auld said. "Labour costs remain elevated and margins are still under pressure, but the broader trend is toward easing capacity constraints and more moderate price growth."
Andrew Auerbach (pictured right), group executive of business and private banking at NAB, said the improving confidence reading did not eliminate the difficulties firms continue to face.
"What we're hearing from customers is that they are feeling more confident about the outlook than they were a few months ago, but price pressures remain a challenge," he said.
"Businesses are looking at every part of their operation to find savings. Some are reducing fuel and transport costs by planning routes more efficiently or investing in more fuel-efficient site equipment, while others are working closely with suppliers and customers to manage costs and keep goods moving."
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