Australia business conditions improve in February, prices rise
AUSTRALIAN business conditions rebounded in February as sales and profits picked up, a survey showed on Tuesday (Mar 12), while retail prices jumped in a possible red flag to progress on slowing inflation.
The survey from National Australia Bank (NAB) showed its index of business conditions rose three points to +10, taking it back above the long-run average of +7.
Its volatile measure of business confidence dipped one point to zero, with the retail sector a major drag as high mortgage rates and past inflation weighed on incomes.
The survey’s measure of business sales climbed five points to +14, while profitability rose three points to +9 and employment added one point to +6. Capacity utilisation dipped to 83.4 per cent, from 83.7 per cent.
“It is really too early to say if this is just a temporary lift or the beginning of a more meaningful turnaround,” said NAB’s chief economist Alan Oster.
He noted activity was still strong in services sectors such as transport, recreation & personal services and finance, business & property, but weak in retail and construction.
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“Cost pressures clearly remain elevated for businesses and it appears there is still some scope for firms to pass this through to output prices,” added Oster.
Quarterly growth in purchase costs rose 1.8 per cent in February. Growth in retail prices rebounded to +1.4 per cent from +0.9 per cent, undoing some of the easing in goods prices seen over December and January.
“These results are a good reminder that a lot of the progress on inflation to date has been driven by the improvement in the global supply environment and from here, the improvement is unlikely to be linear,” said Oster.
The Reserve Bank of Australia has lifted interest rates to a 12-year peak of 4.35 per cent in an effort to restrain inflation and continues to warn that another hike might be needed even as the economy slows. REUTERS
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