Australia business mood brightens as activity holds up

SYDNEY (Reuters) -A measure of Australian business confidence rose to a three-year high in July thanks to strength in services and construction, a survey showed on Tuesday, though rising costs also put upward pressure on retail prices.

The survey from National Australia Bank showed its index of business confidence climbed to +7 in July, from +5 in June, the highest reading since August 2022. Its measure of business conditions eased to a still solid +5 in July, after jumping to +7 the previous month.

"Overall, the survey points to an improvement in activity through Q2 and suggests that the worries globally have not materially influenced local hiring and investment decisions," said NAB's chief economist, Sally Auld.

"Generally, the services sectors, both consumer facing and for businesses, are stronger while retail and wholesale remain weaker."

Confidence could have been supported by expectations for lower borrowing costs, with the Reserve Bank of Australia widely expected to cut interest rates to a two-year low of 3.60% on Tuesday. [AU/INT]

The survey's measure of business sales dipped 3 points to +11 in July, after a 9-point jump in June, while profitability eased 2 points to +2.

In a cautionary note for the labour market, its measure of employment fell 3 points to +1. Official data in June showed a surprise jump in unemployment to the highest since late 2021 at 4.3% and sparked worries about a weakening trend.

Price indicators in the survey pointed to pockets of ongoing inflationary pressures. Notably, quarterly growth in retail prices accelerated to 1.1% in July, from 0.5% in June, while producer prices rose at a 0.9% pace.

"The survey is consistent with improving economic growth, although still highlights the challenges around cost pressures faced by many businesses," said Auld.

(Reporting by Wayne Cole; Editing by Sonali Paul)

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