Business conditions slid two points to seven in December, an NBA survey showed. — Bloomberg
SYDNEY: Australia’s business conditions eased in the final month of last year while confidence remained at below average levels, reflecting the central bank’s policy tightening campaign to tackle elevated inflation.
Business conditions, which measure sales, employment and profitability, slid two points to seven in December, a National Australia Bank Ltd (NBA) survey showed. Business confidence rose to minus one.
“Conditions started 2023 at a very elevated level but gradually eased over the year as the economy slowed,” Alan Oster, NBA’s chief economist, said in a statement.
“Importantly, there were clear signs of further easing in input cost pressures in the month, with labour and purchase cost growth easing.”
Australia’s central bank has raised interest rates by 4.25 percentage points since May 2022 to counter a spike in inflation in an economy that’s close to full employment and where population growth has supported demand.
Higher borrowing costs have weighed heavily on household sentiment, while businesses have until recently shown greater resilience.
“Some price adjustment through the Black Friday and post-Christmas sales period is normal but the improvement in the survey’s seasonally adjusted price measures likely signals some easing in the underlying pace of inflation,” Oster said.
“Overall, the survey results show that economic growth had eased considerably by the end of 2023 after performing better than expected for much of the year, and this slowing is beginning to translate into improvement in inflation indicators.”
Yesterday’s report showed trading conditions fell three index points to 10 and employment was also down, while profitability remained steady at six index points.
The central bank has warned that further tightening may be required, though recent monthly inflation and employment data suggest an easing of demand.
The central bank meets for the first time this year on Feb 5 and Feb 6.
“Businesses remain cautious about the outlook with growth likely to remain subdued for the time being,” Oster said. — Bloomberg
