Australia business conditions soften in January, costs a problem

Sydney YIMBY members gather for a meeting at a bowling club in Erskineville, Sydney, Aug 19, 2023. REUTERS/File Photo

SYDNEY  – Australian business conditions softened further in January led by a slowdown in the service sector, a survey showed on Tuesday, while price pressures ticked up again after cooling the month before.

The survey from National Australia Bank (NAB) showed its index of business conditions slipped 2 points to +6 in January, just below its long-run average of +7.

Its measure of business confidence added 1 point to +1, following a 7-point rebound in December.

“Confidence remains weak as it has for some time, consistent with ongoing pressures across the economy with growth clearly slowing in the back half of 2023, and cost growth still high,” said NAB’s chief economist Alan Oster.

READ: Australian Dec consumer sentiment edges up, set for second worst year

The survey’s measure of business sales eased 3 points to +11, while both profitability and employment dipped 2 points to +5. Capacity utilization picked up to 83.6 percent, from 82.8 percent.

Quarterly growth in purchase costs edged up to 1.8 percent in January, while growth in retail prices rebounded to +0.9 percent from +0.5 percent in December.

“Price pressures remain solid despite the ongoing easing in activity measures,” Oster said. “However, they typically lag activity in the economy and we expect an ongoing easing in price pressures across the economy in early 2024.”

READ: Australia’s central bank holds rates as inflation cools

The Reserve Bank of Australia (RBA) has lifted interest rates to a 12-year peak of 4.35 percent in an effort to restrain inflation and continues to warn that another hike might be needed even as the economy slows.