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Business confidence hits 9-month peak

Australian business confidence has hit a nine-month high reflecting an improved global outlook, says the National Australia Bank.

The lender's business confidence index for January increased two points to 12 points, its highest mark since April last year.

NAB said the result was an encouraging signal for investment and reflected the improved global economic conditions.

NAB chief economist Alan Oster said leading indicators on the survey - taken before last week's financial market volatility - were generally positive, with sales and profitability strongly higher and employment conditions unchanged.

"While forward orders have eased a little, they remain above average and capacity utilisation has been trending up which is a good sign for both future investment and employment," Mr Oster said.

Meanwhile, the business conditions index jumped six points to 19 points, well above the long-run average with conditions "solid-to-strong" across all major sectors except retail.

Mr Oster said the construction industry was performing particularly well, recording improved trading conditions, profitability and employment.

"(The result) probably reflects the still-elevated residential construction pipeline, infrastructure construction and the gains in non-residential building approvals last year," Mr Oster said.

But on the flipside, retail continues to face tough conditions as stagnant wages growth leads to modest consumption by consumers.

And, Mr Oster said, conditions in the recreation and personal services industry fell to levels not seen in three years.

"The slippage in conditions in recreation & personal services to the lowest level in three years bears close watching and, together with the ongoing weakness in retail conditions, points to continued softness in consumer activity," Mr Oster said.

On a state-by-state basis, NAB said business conditions were at their best in Tasmania, up 24 points in trend terms, while mining and construction businesses were the most confident.

The employment index was unchanged in January, after a few months of trending downward.