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Australia Business Confidence Ticks Up in October

Australian business conditions softened slightly n October but firms grew more confident on he future as speculation swirled about a possible cut in interest rates, a survey showed on Tuesday.

Sydney Harbor Bridge & skyline
Scott E Barbour | Photographer's Choice | Getty Images
Sydney Harbor Bridge & skyline

National Australia Bank's (NAB) monthly survey of more than 400 firms showed its measure of business confidence rose to 2 in October, from -1 in September and a two-year low of -9 in August when volatility in world markets was acute.

The survey's measure of business conditions eased back 3 points to -1 in October, reversing September's gain and pointing to an economy growing around the long-run average of 3.25 percent a year.

Confidence could get a further fillip this month given the Reserve Bank of Australia (RBA) confirmed the speculation by cutting interest rates for the first time in over two years.

Still, Europe remains a great source of economic uncertainty and concerns about global growth seemed to take a toll on the booming mining industry in October with confidence in the sector slipping for a third straight month.

In contrast, the construction industry enjoyed a lift in both confidence and activity in October, partly tied to rebuilding in Queensland following floods early in the year.

The survey's index of sales dipped a point to 3 points in October, while profitability eased 2 points to -4. The index of forward orders ticked 2 points higher to -2.

The measure for employment intentions dropped back to -1, from 3 in September, with weakness in recreation & personal services and wholesale offsetting gains in construction and mining.

The outlook for hiring had dimmed in recent months with the unemployment rate rising 5.2 percent in September, from a low of 4.9 percent in April. The official jobs report for October is due on Thursday and analysts look for a rise of around 10,000.

Encouragingly NAB's index of capital expenditure climbed 5 points to 7 in October, with spending significantly higher in construction, wholesale and transport & utilities.

NAB chief economist, Alan Oster, has tentatively pencilled in a further rate cut from the RBA in February on the basis that inflation and activity may remain subdued in the short term.

"However, another cut is by no means certain, particularly if activity and employment are showing signs of strength in early 2012," he added.