Business confidence “eroded” in the June quarter, even while conditions improved slightly, according to NAB's (ASX:NAB) latest Quarterly Business Survey.
The confidence index fell to six during the quarter, fully unwinding a five-point gain from the previous quarter, the report shows.
Both short and long-term expectations for business conditions deteriorated, as did short and year-ahead employment expectations.
The latter decline “implies that the labour market was weaker in the quarter than suggested by the employment index alone,” the report states.
NAB attributed the declining confidence partly to the ongoing impact of the high Australian dollar.
Business conditions improved slightly in the quarter, with the corresponding index growing from two to three, but remain subdued in comparison to recent results.
Conditions were bolstered by a rise in profitability, but were partly offset by a fall in employment, and trading conditions remain weak, the report states.
Conditions were the strongest in the mining sector, which improved sharply, with the business and transport & utilities sectors also recording improvements.
But conditions further deteriorated in retail, recreation and manufacturing, most likely due to shaky consumer confidence.
Conditions were strongest in mining-heavy WA, which scored an 11 on the index, compared to next-highest NSW on 3. Business conditions in Queensland were the weakest of all the mainland states, the report states, despite indications of the state's “solid improvement.”
Labor cost growth meanwhile eased in the June quarter, but respondents generally expect near-term wage pressures to intensify.
Over six in ten participants also expect medium-term inflation to grow to 3-4%, and nearly half class inflation as a minor problem. A far smaller 7% believe the problem is serious, but this is up from only 3% in the March quarter.