REPEAT: MNI:Australia Biz Survey Shows Outlook Remains Bright

Repeats Story Initially Transmitted at 01:42 GMT Apr 10/21:42 EST Apr 9

By Sophia Rodrigues

     SYDNEY (MNI) - The National Australia Bank's business survey for March

points to solid outlook for both the mining and non-mining sectors, despite

conditions easing from a record high level seen the month before.

     The outlook for mining is expected to be supported by elevated confidence

in that sector while for non-mining it is the profitability index that would

support investment in the sector.

     Data published by NAB Tuesday showed business conditions eased to +14

points in March from +20 points in February but remained well above the

historical average of 5.5 points and was unchanged in trend terms.

Significantly, all components of the index remain above average.

     Business confidence also eased 2 points to +7, and was just above the

historical average of +6. Confidence was likely affected by U.S. President

Donald Trump's announcement of tariffs on at least $50 billion of Chinese

imports.

     Both conditions and confidence were highest in mining in trend terms and

the last time this occurred was in May 2012. Given that mining confidence tends

to lead changes in conditions, the fact that confidence has held on to recent

gains is positive for mining outlook. 

     At the same time, NAB has cautioned that commodity prices could ease over

the rest of the year and this could place pressure on mining conditions and

confidence later this year.

     In case of non-mining, the solid outlook is supported by the profitability

index which remains elevated despite coming off its peak in late 2017. According

to NAB, increased company profits can be a positive for business investment and

importantly so in the current environment where businesses are showing increased

preference on internal financing to boost investment.

     The outlook for the non-mining sector is also boosted by the highest

reading for retail conditions in trend terms in nine months. Also significant is

the rise in personal and recreational services which, for now, has arrested the

downward trend seen since last October. The sustainability of both these is also

important for the Reserve Bank of Australia's outlook for household consumption,

and thus for monetary policy.

     Inflation indicators in the survey were mostly disappointing with retail

inflation back in negative, and final product prices easing slightly. But

purchases costs, while stable in the latest month, has been rising since late

2016 and provides some tentative evidence of inflationary pressure. If

sustained, this would push core consumer price index inflation into the RBA's

target band, says NAB.

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