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Monday, October 12, 2015



Business confidence recovered in September from its worst reading in two years, according to the latest National Australia Bank survey, as industry captains welcomed Malcolm Turnbull's replacement of Tony Abbott as Prime Minister and global market upheaval subsided.
NAB said on Tuesday that its main business confidence index jumped from 1 point in August - its lowest level since mid-2013 - to 5 points in September. The results, gleaned from a survey of about 400 companies in the last week of September, suggests business support for Mr Turnbull, and relief at the end of leadership uncertainty within the Liberal Party.
However, the confidence index remains below its mid-year peak, and was not broad-based across all industries. Sentiment in mining, construction and finance fell, the last two perhaps because of perceptions that the residential housing boom is faltering.
"Business confidence recorded a partial recovery in September, increasing to 5 index points from 1," NAB economists, led by Alan Oster, wrote.
"It is not clear to what extent this reflects the change in leadership of the Liberal Party, as solid business conditions and some dissipation of financial market jitters may have also contributed to the result," they said.
The main business conditions index was flat at 9 points, with trading, profitability, forward orders, stocks and exports all down on their August levels. Employment, however, climbed from negative 1 in August to 4 points in September.
Within this, however, NAB noted sharper convergence between sectors and industries, with services continuing to perform much better than traditional industrial mainstays such as mining and manufacturing.
Levels of confidence, too, varied widely between different industries, with the improvement concentrated in transport and utilities, which were up 14 index points, and personal services, which surged 12 points.  Not surprisingly, given weak commodity prices and softening demand from China, mining companies were the least confident, registering a negative 14 index points.
NAB said the latest results suggested the lower Australian dollar had helped the "non-mining sector recovery" build momentum.
"This is particularly apparent in industries thought to be highly responsive to currency changes in the near-term, including personal and business services," the bank said.
It stuck to forecasts that the Reserve Bank of Australia would leave rates on hold at 2 per cent for the forseeable future, with no further monetary easing.
"Weak commodity prices and falling mining investment will remain a drag on economic activity and downside risks from offshore remain pronounced," the bank's economists said.
"However, we find it difficult to mount a case for further policy easing on purely domestic grounds and view market pricing for another 25 basis point cut over the coming six months as overly pessimistic."
Source: sydneymorningherald

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