Australia business confidence slightly eases in Q3 on depressing sales, profits

Business confidence in Australia slightly eased during the third quarter of this year, following depressing sales and profits during the period that hampered corporate earnings; despite this, firms still turned out more confident on the outlook for activity and employment.

National Australia Bank's (NAB) quarterly survey of more than 920 firms showed its index of business conditions fell 4 points to +7 in the third quarter, though that remained above its long-run average. The monthly version of this survey showed weakness in July but a recovery in September.

The business confidence index rose 2 points to +5 and firms were more optimistic on the outlook for the next 12 months. The measure of employment ticked up a point to +3 and forward orders improved to +4, a promising sign for labor demand.

"Leading indicators were once again encouraging and remain consistent with NAB's expectation for activity in the non-mining economy to be solid in the near-term," said Riki Polygenis, Head, Australian Economics, NAB.

However, the survey also found producer and retail prices barely grew during the quarter, suggesting the official inflation report for the third quarter due on Oct 26 may also be soft. Meanwhile, the Reserve Bank of Australia (RBA) this week highlighted the importance of the inflation report for its next monetary policy meeting in November.