Australia business confidence rebounds, activity lags: survey

Australia business

Australian business confidence rebounded sharply in December thanks to lower interest rates and better news offshore, though activity lagged due to weakness in the retail, manufacturing and construction sectors, a survey showed on Tuesday.

The monthly survey of around 500 firms by National Australia Bank found a broad-based recovery in confidence after a slump in November, perhaps linked to the Reserve Bank of Australia's (RBA) cut in rates early in the month.

The survey's main measure of business confidence climbed to 3 in December, more than recouping November's decline to -9 and the highest reading in five months. The index of business conditions improved to -4 in December, from -6 the previous month.

"Firms appear to have taken relief from a last minute agreement to delay the US 'fiscal cliff', while signs of strengthening in the Chinese economy have also helped," said NAB chief economist Alan Oster. "This, combined with another RBA rate cut in December, is likely to have helped confidence."

The survey was conducted between Jan 9 and Jan 15.

The survey's measure of business sales ticked down in the month, but those for profitability, employment and forward orders improved.

Conditions in transport & utilities and recreation & personal services were relatively healthy, but the wholesaling sector took a sharp turn for the worse.

Price pressures remained very subdued in December, which is one reason Oster expects the RBA will cut rates further this year.

The central bank holds its next policy meeting on Feb. 5, but is thought unlikely to move so soon after its last easing.

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