Australian business conditions recovers in June, albeit remaining weak

Australia’s conditions recovered to 3.4 in June, up 2.2 points from the disappointing May result, but remained below the long-run average. The post-election bounce in confidence in May was not maintained, with confidence falling 5.1 points to 2.2 in June.

There were mixed signals for the labour market; employment and capacity utilisation improved from recent lows but the weakness in profitability persisted, which is associated with slower employment growth, ANZ Research reported.

Trading, capacity utilisation, employment and exports improved but stocks were down. Profitability and forward orders remained noticeably weak. Labour cost growth moved higher but purchases cost growth was steady. Capacity use was consistent with the current unemployment rate and the employment index suggested monthly jobs growth of around 20k.

Business conditions improved in all states aside from South Australia, where conditions fell by 4.8 points. Western Australia saw the largest monthly gain (+9.1 points), followed by Tasmania (+6.2), Queensland (+3.7), Victoria (+3.6), and New South Wales (+1.1).

Tasmanian conditions remain well above their long-run average while South Australia is slightly above the three-month average.

Business conditions recovered to an eight-month high in the construction industry, while finance also saw solid improvement. Retail saw a slight rise but remains at historically weak levels. Mining conditions fell but it is still the only industry with conditions above the long-run average. Manufacturing and transport recorded small rises while wholesale and recreation deteriorated, the report added.