By Wayne Cole
SYDNEY (Reuters) - A measure of Australian business confidence slid in June as rising costs and worries about consumer spending slugged the retail sector, though most firms reported actual activity was holding up well so far.
Tuesday's survey from National Australia Bank (OTC:NABZY) Ltd (NAB) showed its index of business conditions eased 2 points to +13 in June, but remained well above its long-run average.
Its measure of confidence fell 5 points to just +1, with rising costs a major drag. The survey's measure of purchase costs climbed to a record high of 4.8%, while labour costs rose 3.6% at a quarterly pace.
"Confidence sank below average in June as inflation and interest rate hikes clouded the outlook," said NAB group chief economist Alan Oster.
"Confidence in the retail sector took a significant hit, falling more than 20pts to be well into negative territory, reflecting concerns about the outlook for household spending."
Surging inflation has led the Reserve Bank of Australia (RBA) to hike three times since early May, lifting rates by 125 basis points to 1.35% and to flag more ahead.
Markets are wagering on another 50 basis points in August and rates as high as 3.25% by year end.
That hawkish outlook has darkened the consumer mood, with two surveys out on Tuesday showing sharp falls in confidence and pessimism on the economic outlook.
So far, NAB's survey has shown resilience in business activity. Its measure of sales slipped 3 points in June but at +18 was still historically strong.
Profitability fell 4 points to +12 and the employment index dipped 1 point to +10, a solid reading that suggested the jobless rate could still drop to lows last seen in the 1970s.
"Overall, the survey suggests firms are increasingly wary of how the economy will hold up over the months ahead, despite continuing to experience fairly strong conditions at present," added Oster.