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Business Conditions Ease in Australia, While Interest Rates Rise to Tackle Inflation: NAB Survey

ByEditor

Feb 13, 2024
In January, Australian business conditions weaken, costs become an issue

The latest survey from National Australia Bank (NAB) showed that business conditions in Australia eased in January, with the service sector experiencing a slowdown. This led to a decrease in the index of business conditions to +6, just below its long-run average of +7. Despite this, the measure of business confidence increased by 1 point to +1, following a 7-point rebound in December.

The survey revealed that business sales eased 3 points to +11, while both profitability and employment dipped 2 points to +5. Capacity utilization also picked up to 83.6% from 82.8%. In terms of costs, the survey showed that quarterly growth in purchase costs edged up to 1.8% in January, while growth in retail prices rebounded to +0.9% from +0.5% in December.

NAB’s chief economist Alan Oster noted that confidence remains weak due to ongoing pressures across the economy, including slowing growth and high cost growth. He mentioned that despite these price pressures remaining solid, they are expected to ease in early 2024 as the economy continues to slow.

In response to these economic conditions, the Reserve Bank of Australia (RBA) raised interest rates to a 12-year peak of 4.35% in an effort to restrain inflation. The RBA also warned that another rate hike might be necessary, despite the slowing economy.

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