Business activity up, confidence steady

SYDNEY - Australian business conditions strengthened in September as sales, profits and employment all improved, even as firms remained gloomy on the outlook, a private survey reported yesterday.

The National Australia Bank business conditions index rose a seasonally adjusted 4 points to 14 in September. The index marks the difference between the percentage of survey respondents citing good or very good conditions and those nominating poor or very poor.

The index of business confidence was steady at 6, down from the year's peak at 14, as firms fretted about high oil prices and rising interest rates.

"While business conditions remain at reasonable levels, the main message from this month's survey is that confidence has continued to trend down in the face of recent rate hikes," said Alan Oster, NAB's chief economist.

The Reserve Bank of Australia has raised its key cash rate twice this year, to a five-year high of 6 per cent, in an effort to restrain inflation.

Average capacity utilisation dropped to 81.8 per cent in September, from 83.1 per cent in August.

Wages increased by 1.2 per cent leaving the annual rate unchanged at 4.7 per cent. Retail prices rose 0.3 per cent while the annual pace of growth slowed to 1.6 per cent.

- REUTERS