Australian business confidence remains weak in January: NAB survey

Retail conditions stayed at lower levels, despite a rebound in capacity utilisation which remains above the long-term average, signalling continued resilience in operational capabilities. Businesses are facing elevated cost pressures, both in labour and other inputs, but there seems to be some leeway for firms to transfer these costs to consumers. This dynamic is underlined by a noticeable uptick in price growth within the retail sector and across product prices more generally. The ability of firms to maintain this pass-through of costs will be critically observed in 2024, as pressures on profit margins become a growing concern, as per the survey.

The survey also anticipates a focus on the slowdown in activity, with any further softening of conditions potentially moving the survey's activity measures significantly below the long-run average. Meanwhile, business confidence edged up by 1 point but remains very weak, with manufacturing contributing to the slight improvement. Across industries, confidence is relatively weak, particularly in the goods sectors, including retail and wholesale.

Forward orders saw a slight increase of 1 point to minus 1 index points, still indicating soft demand. However, capacity utilisation experienced a rebound to 83.6 per cent, well above its long-run average, suggesting that businesses retain a strong operational footing despite challenging conditions.

Input cost growth remained stable, with labour cost growth holding at 2 per cent and purchase cost growth marginally rising to 1.8 per cent in quarterly equivalent terms. Output prices saw a rebound, particularly in retail price growth which rose to 0.9 per cent from 0.5 per cent, and a survey-wide increase in final product prices to 1.2 per cent.

Trading conditions dropped 3 points to 8 index points, with profitability and employment indices both experiencing slight declines to 5 index points. While trading and profitability indices have dipped below the average, employment remains above the long-run average.

“The gradual easing in business conditions continued in January, with the headline conditions index now just below its long-run average,” said NAB chief economist Alan Oster. “Both profitability and trading conditions are now below average with conditions supported somewhat by still above-average employment conditions.”

Fibre2Fashion News Desk (DP)