AUSTRALIAN business conditions continued to soften in December as manufacturing and construction lost ground, a survey showed on Tuesday, while price pressures eased markedly in a promising sign for slower inflation.

The survey from National Australia Bank (NAB) showed its index of business conditions dipped 2 points to +7 in December, though that was still just above its long run average.

Its measure of business confidence rebounded 7 points to -1, led by a pick up in the mining and retail sectors.

Importantly, measures of labour and production costs retreated after a bounce in November. Quarterly growth in retail prices dropped sharply to 0.6 per cent, the lowest since late 2020, from 1.8 per cent the previous month.

“The sales periods around Black Friday and Christmas likely have played a role here but this is nonetheless an encouraging sign that inflation may have eased at the end of the quarter,” said NAB’s chief economist Alan Oster.

That should be a comfort for the Reserve Bank of Australia (RBA), which has lifted interest rates to a 12-year high of 4.35 per cent to combat inflation.

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Consumer price inflation ran at 5.4 per cent in the September quarter, though a partial measure of monthly CPI had showed a fall to 4.3 per cent in November.

The NAB survey’s measure of business sales eased 3 points to a still solid +10 in December, while profitability held at +6 and employment dipped a point to +7. Capacity utilisation softened to 82.7 per cent, from 83.6 per cent. REUTERS