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Australian Business Confidence rises to a 6 Year High

September 8th, 2009

Category: Retail Business News

Busy Trucks Working

Australian Business Rebounds

Business confidence rose in August, to six year high in the latest positive news for the Australian economy. Last month we had an article about consumer sentiment reaching a 35 year high, this month there is good news in the business sector.

The National Australia Bank’s monthly business survey showed business confidence at the highest level since October of 2003, as the retail, finance, manufacturing and personal services sectors rose.

The index rose 8 points in August to 18 index points.

“It is worth noting firstly that the August survey came out of the field on Friday 28 August,” said NAB chief economist Alan Oster. This was before the announcement of the better-than-expected second-quarter GDP gain of 0.6 per cent.

“As such the further significant improvement in business confidence is quite remarkable,” Mr Oster said.

“Confidence levels are now considerably above long term average levels and indeed are at the highest level since October 2003. Nothing that happened last week would, in our view, have lessened those readings – indeed it may well have added to confidence levels.”

Confidence levels were consistently strong across most industries, NAB said.

The positive news comes after the ANZ Bank job ads survey for August, released yesterday, showed the first positive result in over a year.

Within NAB’s business confidence survey, trading rose 8 index points to 12 in August, while profitability skyrocketed to 11 points in August from 1 in July.

“While these outcomes are very encouraging, to some extent we suspect that current confidence levels may be starting to get to unrealistic levels – just as they fell to overly pessimistic levels earlier in the year,” said Mr Oster.

“Certainly the gap between confidence and actual business outcomes – and indeed business intentions for capital expenditure – points in that direction.”

Some Weakness evident

Not all metrics within the NAB survey rose, with forward orders slumping 7 index points to minus 2 in August.

“The survey clearly points to continuing strong growth in demand in the third quarter,” Mr Oster while the result is encouraging, activity levels are yet to catch up with the big spike in confidence.

“It does, however, suggest that business continues to draw on inventories to help satisfy increased demand.”

“Businesses are feeling happier, they’re getting better forward orders, etc. but they’re not cranking up the factories to produce more” Mr Oster said.

“They’re tending to run down their inventory levels and they’re tending to import.”

“So some of that demand is going to leak away, but at the end of the day we’re still an economy that’s probably still growing, which is pretty good,” he said.

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