SYDNEY, Feb 11 (Reuters) - A measure of Australian business conditions rose to its highest in nearly three years in January and firms felt more confident about the outlook for orders and employment, a survey reported on Tuesday.
National Australia Bank’s survey of more than 400 firms also found a marked improvement in manufacturing, surprising given constant reports of job cutting and closures.
The report’s index of business conditions rose 1 point to +4 in January, the highest since March 2011, while all its various sub-indicies turned positive. The main measure of business confidence climbed 2 points to stand at +8, above its long-run average.
“Conditions look to have turned around a little faster than we had expected just a few months ago, with low interest rates and depreciating AUD gaining surprisingly good traction in some non-mining sectors of the economy,” said NAB’s chief economist, Alan Oster.
“The improvements over recent months have established a clear upward trend in business activity, suggesting some upside potential to our current growth outlook.”
The better trend in business conditions, if maintained, implied underlying economic growth of around 3.25 percent for the first quarter, which would be well above NAB’s own forecast.
In an encouraging sign for the subdued labour market, the survey’s measure of employment climbed 5 points to +1 for its highest reading in 21 months. Manufacturers again reported a big improvement, followed by sports & recreation and business services.
There was also promising news for future growth with the index of forward orders jumping 8 points to +6, the highest since 2009.
The index of capital spending plans rose 3 points to +4 as a pick-up in the services sector outweighed a pullback in mining and construction.
That would be welcome news for the Reserve Bank of Australia (RBA), which has been counting on a revival in non-mining sectors to offset the drag from a cooling resource boom.
Just last week, the central bank all but shut the door on further rate cuts, citing improving economic conditions and a pick-up in inflation.
The RBA cut rates to a record low of 2.5 percent last August and is now expected by many to be on hold for months to come.
The NAB survey also showed some acceleration in inflationary pressure during January, with labour costs and purchase prices on the rise. (Reporting by Wayne Cole; Editing by John Mair)