Australia business conditions improve but confidence falters on China

Australian business conditions improved in August as both trading and profitability grew, yet confidence took a hit amid growing worries about the health of China’s economy, a survey showed on Tuesday.

National Australia Bank’s monthly survey of more than 500 firms showed its index of business conditions rose 5 points to +11 in August. In contrast, its measure of business confidence dipped 3 points to +1 – its lowest since mid-2013.

"While confidence tends to track conditions quite closely, recent financial market ructions and China growth concerns appear to have had an unnerving effect on business – albeit not enough to send confidence into negative territory," said NAB’s chief economist Alan Oster.

Overall, Oster said the survey results added to mounting evidence that a weaker Australian dollar and record low interest rates were having "the desired effect and helping to offset the weakness in mining".

The survey’s index of sales jumped to +20, from +12, while profitability rose five points to +12.

Forward orders climbed two points to +5, but disappointingly, the index of employment stayed in negative territory at -1.