MNI POLICY: Australia NAB Survey Point To Jobless Rate Decline

--NAB Business Conditions, Confidence Up in September

By Sophia Rodrigues

     SYDNEY (MNI) - Business conditions remained at an elevated level in

September, as a rise in employment index offset the decline in forward orders,

boding well for the outlook for the Reserve Bank of Australia's monetary policy

for the next move in the cash rate to be up.

     The employment index points to a decline in the unemployment rate over the

rest of this year and into 2019, and is key to the RBA's forecast for gradual

rise in wages growth and for inflation to rise to the middle of its target band.

     The monthly business survey, published by National Australia Bank Tuesday,

showed business conditions rose to +15 in September from a downwardly revised

+14 in August. Business confidence also edged higher to +6 from +5 in August.

     The elevated level of business conditions was mainly due to high

employment, profitability and trading levels which offset a decline in forward

orders and stocks. Forward orders gave up the entire gains made the month before

to be back at an average level of +2.

     In the latest month, the rise in employment index was the highlight and it

suggests employment growth of over 20,000 over the next six months. According to

NAB, the index along with other labor market indicators and a stabilization in

the participation rate, suggests further declines in the unemployment rate over

the rest of 2018 and into 2019.

     Even economists at ANZ retained their view for gradual decline in the

jobless rate despite their own job advertisement survey for September, published

Monday, suggesting slower growth in employment that pointed to a steady

unemployment rate.

     One concerning aspect in the latest survey was weak inflationary pulse in

the economy with both input and output prices measures declining. Retail prices

was the main laggard, recording a 0.1% decline on a quarterly basis compared

with +0.8% in the August survey. Compared with history, surveyed price measures

remained weak.

     Also disappointing was the persistent weakness in retail conditions which

once again was the only industry to record negative conditions.

     NAB provided further details about a question on borrowing conditions asked

in the survey. The responses suggested that while there has been a tightening in

conditions over the past year, it has not been been very significant and is

smaller than experienced in 2011-2012 and also significantly less than occurred

during the global financial crisis.

     Below is the table from the survey:

                                          September  August

-----------------------------------------------------------

Business Confidence                              +6      +5

Business Conditions                             +15     +14

Trading                                         +17     +18

Profitability                                   +14     +14

Employment                                      +12      +9

Exports                                           0      -1

Forward Orders                                   +2      +5

Stocks                                           +1      +5

Retail Prices (quarterly rate %)               -0.1    +0.8

Labor costs (quarterly rate %)                 +1.3    +0.9

Final products prices (quarterly rate %)       +0.9    +1.3

Capacity Utilization (%)                       82.1    82.3

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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