Australia business confidence improves even as conditions slacken, survey says
SYDNEY (Reuters) - A measure of Australian business activity eased in January as sales and profits softened, a survey showed on Tuesday, though confidence got a boost amid hopes for a near-term reduction in borrowing costs.
The survey from National Australia Bank (NAB) showed its index of business conditions fell 3 points to +6 in January, reversing gains made the previous month. The volatile confidence index bounced to +4, from -2, the highest reading since October.
The index of sales fell 4 points to +6, while profitability slid 6 points to -2 pointing to pressure on profit margins, particularly in the retail sector.
"Cost pressures remain elevated for businesses and are not being fully passed onto consumers, which may be weighing on profitability and therefore overall business conditions," said Alan Oster, chief economist at NAB.
On the brighter side, the employment index added 1 point to a relatively healthy +5, continuing the outperformance of the labour market. Conditions worsened in the mining, finance and property sectors, while retail fell back after an upbeat December.
There could be some relief ahead for firms and consumers as markets are wagering heavily the Reserve Bank of Australia will cut its 4.35% cash rate next week to reflect a marked slowdown in inflation. It would be the first cut since the depths of the pandemic in 2020.
The NAB survey had mixed news on inflation, with labour costs rising to a quarterly pace of 1.8% in January while growth in purchase costs slowed to 1.1%. Retail prices rose at a quarterly pace of 0.9%, up from 0.7% in December.
The capacity utilisation rate dropped to 82.0%, from 82.7%, suggesting there was a little more slack in the economy.
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