In January, Australian business conditions weaken, costs become an issue

“Australian Economy Slows Down Despite Business Confidence Rebound: NAB Survey Shows

In January, the latest survey from National Australia Bank (NAB) showed that business conditions in Australia softened. This was due to a slowdown in the service sector, which led to a decrease in the index of business conditions to +6, just below its long-run average of +7. Despite this, NAB’s chief economist Alan Oster noted that business confidence increased by 1 point to +1, following a 7-point rebound in December.

According to Oster, confidence remains weak due to ongoing pressures across the economy, including slowing growth and high cost growth. The survey revealed that business sales eased 3 points to +11, while both profitability and employment dipped 2 points to +5. Capacity utilization also picked up to 83.6% from 82.8%.

In terms of costs, the survey showed that quarterly growth in purchase costs edged up to 1.8% in January, while growth in retail prices rebounded to +0.9% from +0.5% in December. Despite these price pressures remaining solid, they are expected to ease in early 2024 as the economy continues to slow.

The Reserve Bank of Australia (RBA) has responded to these economic conditions by raising interest rates to a 12-year peak of 4.35% in an effort to restrain inflation. The RBA also warns that another rate hike might be necessary despite the slowing economy

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