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REPEAT: MNI DATA: Australia Biz Confidence Up But Orders Ease

Repeats Story Initially Transmitted at 00:30 GMT Jan 30/19:30 EST Jan 29
--Retail Prices Fall into Negative Territory
--NAB Adds Property Market as Additional Risk to RBA Hike View
By Sophia Rodrigues
     SYDNEY (MNI) - Business confidence in Australia rose to the highest level
since July, helping narrow the gap between conditions and confidence, and
pointing to an encouraging investment environment. However, a pullback in
forward orders suggest economic activity may not accelerate as much as
confidence and conditions suggest.
     The December business survey, published by National Australia Bank Tuesday,
showed confidence rose 4 points to +11, the highest since July. Business
conditions was unchanged at +13 but remained well above the long-run average of
+5.
     Forward orders eased to +4 in December from +6 in November. According to
NAB, this indicator has been giving a fairly accurate read of domestic
non-mining activity compared with business conditions, and it suggests domestic
demand accelerated in the final quarter of 2017 and the momentum is likely to
continue in early 2018.
     Once again, the survey showed construction was the bright spot in the
economy while retail was the underperformer. Business conditions in retail was
negative, both in trend and seasonally adjusted terms. Profitability and trading
were mildly negative but the biggest worry was strongly negative employment
conditions. Another disappointment was a sharp weakening in final retail prices
which fell into -0.4% in quarterly terms compared with +0.3% in November.
     Overall employment conditions eased a little in December and according to
NAB it implies employment would grow at a much slower pace of around 20,000 per
month compared with a growth of around 35,000 per month in 2017 according to the
official Australian Bureau of Statistics data.
     How far this employment growth results in drop in jobless rate and
acceleration in wage growth is important for the Reserve Bank of Australia's
monetary policy outlook. For now, the risk is for a hold-for-longer cash rate
despite market pricing showing 20% chance of a 25bps hike in May.
     NAB economist Alan Oster has maintained his outlook for two RBA cash rate
hikes in the second half of this year but has now added property market as an
additional risk to this outlook. Previously Oster said the RBA will hike only if
the labor market and wages improve further.
     But this month Oster said softer trends in the property market may make the
RBA cautious and he maintains his expectation for the first RBA hike to come in
the second half of this year, "but only if the labor market and wages improve
further and the property market holds steady."
     Table from the survey: 
                                          December  November
------------------------------------------------------------
Business Confidence                            +11        +7
Business Conditions                            +13       +13
Employment                                      +6        +7
Profitability                                  +15       +14
Trading                                        +18       +17
Exports                                          0        +2
Forward Orders                                  +4        +6
Stocks                                          +1        +2
Retail Prices (quarterly rate %)              -0.4      +0.3
Labor costs (quarterly rate %)                +0.8      +1.2
Final products prices (quarterly rate %)      +0.3      +0.4
Capacity Utilization (%)                      82.2      81.7
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com
[TOPICS: MTABLE]

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