Australian Business Conditions Softer in May

By James Glynn Features Dow Jones Newswires

Australian business conditions eased slightly in May, backing away from the multi-year highs that has marked the business environment so far in 2017, while confidence slumped, according to a survey by the National Australia Bank.

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NAB's business conditions index fell 1 point to 12 points in May from April. The index represents a net balance of responses to the survey. But business confidence dropped sharply, by 6 points to 7 points over the same period.

The survey data follows news last week that the economy slowed in the first quarter to its slowest year-on-year pace since 2009, prompting warnings from some economists that the Reserve Bank of Australia will soon need to cut interest rates.

Alan Oster, chief economist at NAB said there is a disconnect between evidence of solid business activity and data pointing to a slowdown in consumer spending as wage growth remains at record lows.

"The business sector is looking quite upbeat, maintaining the apparent disconnect with a rather melancholy household sector," he said. "How the disparity resolves itself will be critical to the outlook for growth."

The slight moderation in business conditions during May was largely driven by the construction, finance and property business services, but all industries are recording positive business conditions. That is a result not seen since 2010, Mr. Oster added.

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The one patch of softness is in retail, where conditions were only neutral.

"Still, that's surprising given the softer trends in the household sector," he added.

-Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

June 12, 2017 21:44 ET (01:44 GMT)