Australian business conditions rise slightly in August, employment and investment outlook remains positive

Australian business conditions edged higher in the month of August, following declines in the last two months. Profitability rose solidly, along with a strong rise in trading conditions.

Business conditions rose from July’s 12.6 to 15.2 in August. Even if it reverses the declines recorded in June and July, it still leaves conditions shy of the historic peak seen earlier in 2018. The headline figure was mainly driven by solid profits and rebounded trading conditions. Capacity use also rose higher, though it is still slightly below its peak seen in February 2018. Forward orders also rose higher.

Meanwhile, business sentiment fell and the divergence between confidence and conditions is pretty pronounced. This has been the case since the start of 2017. Nevertheless, sentiment has now been lower than average.

State wise, solid rises in business conditions were recorded in New South Wales. In Western Australia, conditions also rose solidly, rising to their highest level since December 2017 – a level which has not been exceeded since mid-2012. Conditions dropped in Victoria, though they continue to be well above average. Indeed, business conditions are above average in every state with South Australia showing the smallest rise compared to the long-run average.

Industry wise, conditions surged in manufacturing and mining. They dropped markedly in wholesale and construction, with more moderate moves throughout other industries. Conditions are above average in all industries expect retail and recreational and personal services.

According to an ANZ research report, the increase in forward orders and capacity utilization, along with solid profitability, imply that the outlook for employment and investment continues to be positive.

At 12:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was highly bearish at -105.982, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 30.9473. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex