Australia business activity soft in April amid global trade unease

SYDNEY (Reuters) -Australian business activity stayed subdued in April as rising costs squeezed profit margins, a survey showed on Tuesday, while firms shied away from fresh investment amid uncertainty over U.S. trade policy.

National Australia Bank's survey showed its index of business conditions edged down 1 point to +2 in April, well below the long-run average. Its confidence index inched up a point to a still weak -1.

The survey was taken at the end of April when markets had managed to stabilise in the wake of U.S. President Donald Trump's tariff shock of April 2.

Sentiment could improve further with the U.S. and China on Monday lowering their tariffs in a 90-day truce.

The survey showed its sales index held relatively steady at +5 in April, as did employment at +4. However, profitability dived 4 points to -4 as higher purchase costs pressured margins.

There was also a notable 6 point drop in the capital spending index to a below average +1, suggesting firms were putting off investment plans until the outlook for the global economy became clearer.

That uncertainty is one reason markets are wagering the Reserve Bank of Australia will cut interest rates again when it meets on May 20, which could also help support sentiment.

(Reporting by Wayne Cole; Editing by Sonali Paul)

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