Australia NAB business conditions weaken in February, disappointing results from retail weigh

Data released earlier on Tuesday by the National Australia Bank (NAB) showed that Australia's business confidence deteriorated in February, largely unwinding most of last month's unexpected surge.

The latest business survey from NAB showed Australia's business confidence in February came in at 7 points, down from the 10 points posted in January. Meanwhile, business conditions dropped from 16 points in January to 9 in February.

NAB said the longer term growth picture is concerning, as it noted the contribution from LNG exports, temporarily higher commodity prices and the residential construction boom will fade, placing pressure on the labour market. However, it added that the drop was not surprising given the strong bounce in January was likely due to temporary factors.

NAB said that most industries are showing solid or improving business conditions, but at the same time cautioned that it is hard to look past the disappointing results from retail, especially given the importance of consumption to the growth outlook.

"We saw the big service industries drive the moderation in business conditions this month, but even after pulling-back a little, these industries continue to lead the non-mining recovery," said Alan Oster, chief economist at NAB.