REPEAT:MNI ANALYSIS:Record Australia Biz Condition;Orders Weak

Repeats Story Initially Transmitted at 00:36 GMT Nov 14/19:36 EST Nov 13

--Retail Sector Improves But Still Weak

By Sophia Rodrigues

     SYDNEY (MNI) - Australian sentiment on business conditions rose to a new

all-time high in October, helped by some improvement in retail conditions, but a

subdued level of forward orders and the continued overall weakness of the retail

sector indicate headwinds to the economy remain.

     While the data are positive, they don't change the overall outlook for the

Reserve Bank of Australia's monetary policy to stay on hold for longer.

     The National Australia Bank's October business survey published Tuesday

showed sentiment on business conditions rose significantly to +21 -- a new

record high, and four times the long-run average of +5 points. The improvement

was driven by big increases in sales and profitability. 

     Business confidence, on the other hand, was steady at +8 points and just

slightly above the long-run average. 

     A highlight of the survey was the improvement in retail conditions, with

the trend rising to -3 from -5 which, according to NAB, is enough to arrest the

downward trend seen in recent months. But details in the retail sector remained

weak overall, with forward orders negative (-7) in trend terms, soft employment

conditions, soft wage pressures, weak cash flow, a deceleration in purchasing

costs and especially subdued inflation.

     Retail sector conditions and weak forward orders suggest a pickup in

household spending is unlikely in coming months.

     Overall business forward orders were also subdued in the survey and

together with the widening gap between business conditions and confidence

suggest the outlook for the economy isn't as bright as the level of conditions

suggest.

     NAB's chief economist Alan Oster said that while the survey appears

extremely strong and of itself would suggest a better-than-expected performance

for the economy, it is unclear just how long conditions can remain at these

record levels. This is because the result was driven by a surprise jump in

manufacturing, while some leading indicators, such as forward orders, that have

been giving a more accurate read on the strength of the economy have actually

softened a little in recent months. 

     "Less upbeat readings on business confidence may also be telling, with

firms previously indicating that uncertainty around the outlook for their

business is holding confidence back. That said, even before the spike in

October, trend business conditions have consistently held up well above average

levels in the past two years," Oster said.

     Table from the October survey:

                                          October  September

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

Business Confidence                            +8         +8

Business Conditions                           +21        +14

Employment                                     +7         +7

Profitability                                 +26        +17

Trading                                       +30        +19

Exports                                        -1         -1

Forward Orders                                 +2         +4

Stocks                                         +2         +4

Capital Expenditure                           +12         +9

Retail Prices (quarterly rate %)             +0.1       +0.3

Labor costs (quarterly rate %)               +0.7       +1.0

Final products prices (quarterly rate %)     +0.4       +0.4

Capacity Utilization (%9                     81.7       81.9

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

[TOPICS: MTABLE]