Business conditions have eased slightly in July, with NAB’s index of business conditions dipping two points to 12 in July, but activity remains solid.

Australian business conditions eased modestly in July but remain at levels consistent with solid activity, a survey by National Australia Bank shows. NAB’s index of business conditions dipped two points to 12 in July, but remained well above the long-run average of six points.

The often-volatile measure of business confidence rose one point to seven, while the measure of profitability fell five points in July to 10 points, unwinding all the gains of the previous month.

In a promising development, the survey’s employment index bounced five points to 10.

“The employment index – based on historical patterns – is consistent with jobs growth of around 23,000 per month, which should see the unemployment rate continue to edge lower over the rest of 2018,” NAB group chief economist Alan Oster said.

Official data for employment in July is due on Thursday, with economists forecasting an increase of around 15,000. There was a gain of almost 51,000 jobs in June.

NAB’s employment index was highest in the mining industry, followed by finance, business & property services as well as construction.

Overall business conditions improved markedly in the construction sector in July, followed by personal & recreation services and wholesale.

Conditions fell in manufacturing, retail, finance, business & property and transport & utilities.

“The business sector looks relatively healthy, and we expect to see enough employment growth to see a gradual reduction in spare capacity, which should in time see a rise in wage growth, and a more general lift in inflation,” Mr Oster said.

The Reserve Bank has highlighted the strength in business conditions and has forecast economic growth to top three per cent both this year and next.