Australian Business Conditions Ease—But Are Falling Costs a Positive Sign for Inflation?
Source: Kapitales Research
Highlights:
NAB business conditions index fell to +7 in January.
Sales and profits weakened, while employment stayed steady.
Cost pressures dropped to their lowest levels since 2021.
Survey Shows Slight Pullback in January
National Australia Bank Limited (ASX: NAB) reported a modest decline in business conditions across Australia, according to its latest monthly survey. At the time of writing, the bank’s business conditions index slipped two points to +7 in January, reversing some of the gains recorded in December. Despite the pullback, the reading remained in positive territory, suggesting business activity is still expanding, albeit at a slower pace. Meanwhile, the survey’s measure of business confidence edged up one point to +3, indicating a slight improvement in sentiment among companies.
Sales and Profits Lose Momentum
The softer conditions were largely driven by weaker trading outcomes. The survey showed the sales index dropped six points to +10, which is still around its long-term average but reflects a loss of momentum at the start of the year. Profitability also eased, with the profits index falling three points to +8. In contrast, employment conditions remained steady at +5 for a third consecutive month, suggesting demand for workers continues to hold up despite broader economic uncertainties.
Cost Pressures Hit Lowest Level Since 2021
One of the more encouraging signs in the survey was the continued easing of cost pressures. Measures of both labour and input costs declined during January, with retail price growth slowing to 0.3% for the quarter, down from 0.5% in December. The survey was conducted before the Reserve Bank of Australia lifted interest rates by 0.25 percentage points to 3.85% last week, marking the first increase in two years as policymakers attempt to curb persistent inflation. The easing in costs could offer hope that inflationary pressures may continue to moderate, even as business conditions soften slightly.
Disclaimer for Kapitales Research
The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
Customer Notice:
Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.
Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au
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Australian Business Conditions Ease—But Are Falling Costs a Positive Sign for Inflation?
Highlights:
Survey Shows Slight Pullback in January
National Australia Bank Limited (ASX: NAB) reported a modest decline in business conditions across Australia, according to its latest monthly survey. At the time of writing, the bank’s business conditions index slipped two points to +7 in January, reversing some of the gains recorded in December. Despite the pullback, the reading remained in positive territory, suggesting business activity is still expanding, albeit at a slower pace. Meanwhile, the survey’s measure of business confidence edged up one point to +3, indicating a slight improvement in sentiment among companies.
Sales and Profits Lose Momentum
The softer conditions were largely driven by weaker trading outcomes. The survey showed the sales index dropped six points to +10, which is still around its long-term average but reflects a loss of momentum at the start of the year. Profitability also eased, with the profits index falling three points to +8. In contrast, employment conditions remained steady at +5 for a third consecutive month, suggesting demand for workers continues to hold up despite broader economic uncertainties.
Cost Pressures Hit Lowest Level Since 2021
One of the more encouraging signs in the survey was the continued easing of cost pressures. Measures of both labour and input costs declined during January, with retail price growth slowing to 0.3% for the quarter, down from 0.5% in December. The survey was conducted before the Reserve Bank of Australia lifted interest rates by 0.25 percentage points to 3.85% last week, marking the first increase in two years as policymakers attempt to curb persistent inflation. The easing in costs could offer hope that inflationary pressures may continue to moderate, even as business conditions soften slightly.
Disclaimer for Kapitales Research
The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
Customer Notice:
Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.
Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au