NAB Survey: Australian Business Conditions Dip, Inflation May Ease

Summary

  • Data released from National Australia Bank (NAB) indicates a decline in business conditions by 2 points to +7 in December, albeit slightly above its long-term average.
  • NAB’s business confidence metrics portrayed an improvement with a 7-point surge to -1, with the mining and retail sectors identified as major contributors.
  • Notably, labour and production costs showed a decrease after a November spike.
  • In tandem, retail price growth for the quarter dropped significantly to 0.6%, marking its lowest figure since the end of 2020.
  • The Reserve Bank of Australia (RBA) may find a degree of reassurance in these developments, especially considering its recent interest rate increase to 4.35% to address inflation.

Initial Survey Observations & Economic Impacts

The latest business-oriented survey conducted by NAB (OTC:) revealed a dip of two points in its business conditions index, positioning it at +7 during December. Nevertheless, this figure still sits slightly higher than the average over a long run.

On an optimistic note, NAB’s assessment of business confidence recorded a robust recovery of seven points to -1. This rebound was primarily catalyzed by heightened activity within mining and retail sectors

Cost & Inflation Metrics

Significantly, both labour and production cost measures exhibited a decrease following a brief uptick the preceding November. Quarterly retail price growth took a substantial fall, arriving at 0.6%, the lowest in about a year, after previously hitting 1.8% the prior month.

Invoice reductions during Black Friday and Christmas periods likely contributed to this dip, however, NAB’s chief economist, Alan Oster, took this as a notable sign of a probable inflation easy during the final quarter.

This trend potentially provides some relief for the Reserve Bank of Australia (RBA) that recently raised interest rates to 4.35%, unseen in the past 12 years, to curb inflation.

Fiscal Confidence & Labor

A slight decrease in the consumer inflation rate to 4.3% in November compared to 5.4% in September signals potential restraint on inflation. Meanwhile, NAB’s survey measure for business sales moderated slightly in December from +3 points to a sturdy +10. While remaining at +6, profitability displayed stability, albeit employment recorded a minimal setback from +1 point to +7.

Simultaneously, capacity utilization underwent a slight softening from 83.6% to 82.7%.

Implications for Forex & Trading Sector

In closing, this NAB survey and its implications potentially affect the Forex trading industry, particularly in relation to the exchange rates of Australian dollar assets, depending on how these economic signals are perceived by the market.

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