Australian business conditions experienced a slight downturn in January, according to the latest survey from National Australia Bank (NAB). The NAB’s index of business conditions eased two points to positive seven, effectively reversing the gain recorded in December. Business confidence saw a marginal increase, edging up one point to three.
Key indicators within the survey revealed a mixed performance. Sales experienced a decrease of six points, settling at +10, although this figure aligns with the long-run average. Profits also declined, falling three points to eight. Employment levels remained steady at five for the third consecutive month, indicating ongoing strength in labour demand.
The survey was conducted before the Reserve Bank of Australia (RBA) decided to raise interest rates by 25 basis points to 3.85 per cent. Encouragingly, the survey indicated easing cost pressures, with measures of labour and input costs both declining in January. Furthermore, quarterly growth in retail prices slowed to 0.3 per cent, down from 0.5 per cent in December.
Michael Hayes, economist at NAB, noted the significance of these trends. “Measures of cost and price growth in the survey fell to new post-pandemic lows,” Hayes stated. “Overall, the January survey showed the economy has retained most of its momentum gained through the past year and the level of activity remains high, notwithstanding some easing in capacity utilisation over recent months.”
