Finance Finance News Business confidence hits a high

Business confidence hits a high

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Businesses confidence has improved, as companies still appear unconcerned about the tough measures in the federal budget.

The NAB business confidence index in July rose three points to 11 points. A reading above zero indicates optimists outweigh pessimists.

NAB chief economist Alan Oster said a bounce in consumer confidence after its post-budget slump and better business conditions had given business confidence a boost.

“A solid jump in business conditions and better forward orders is supporting the relatively optimistic position,” Mr Oster said on Tuesday.

“Stronger sales and profits are driving the trend, but the recovery continues to be relatively jobless with the employment index seeing more moderate gains.”

NAB’s business conditions index rose to eight points in July, its highest level since early 2010

That was from two points in June and zero in May.

Business conditions were particularly strong in the construction sector, helped by a high level of building approvals.

“Much of the strength in conditions in July remains confined to the construction and services sectors which are seeing the benefits of low interest rates and a surge in apartment construction,” Mr Oster said.

“In contrast, structural challenges, political uncertainty and an elevated Australian dollar are creating difficulties for other industries.”

Mr Oster said business confidence outside of the construction and retail sectors was still quite weak.

“The composition of confidence may provide some cause for reservation about this optimism, at least in the medium term,” he said.

“Soft wages growth, a rising unemployment rate and a decline in June quarter retail sales suggest that this confidence may be tested.”

NAB still predicts there will be no movement in the Reserve Bank of Australia’s cash rate in 2014, but added that a chance of a rate cut is increasing.