Australia experienced a notable increase in business confidence during October, as indicated by data released on Tuesday from NAB. The improvement was observed across various industries, except for construction and retail.
The business confidence index climbed from -2 in September to a positive 5 in October. Meanwhile, the business conditions index remained steady at 7 for the month. Trading conditions saw a slight increase by one point to +13, with profitability holding steady at 5 points. Conversely, the employment index experienced a dip, reaching +3 points.
NAB's Head of Australian Economics, Gareth Spence, commented that "conditions continue to track at around average." He further explained, "while we know growth has slowed to its slowest rate in around 30 years over the year to June, excluding COVID lockdown periods, the business survey continues to tell us that activity has held up."
In October, forward orders showed a slight improvement driven by advancements in the retail sector, although capacity utilization fell by 0.7 percentage points to 82.5 percent. Spence added, "Capacity utilization will continue to be an important dynamic for the RBA and the rate outlook as the economy continues to come into better balance."
The survey also highlighted changes in price dynamics. Labour cost growth weakened to 1.4 percent on a quarterly equivalent basis, down from 1.9 percent in September. Purchase cost growth also slowed, reaching 0.9 percent. Output price growth edged down slightly to 0.5 percent from 0.6 percent. However, retail price inflation saw a rebound, increasing to 1.1 percent from 0.6 percent.
Reflecting on these findings, Spence concluded, "The survey, like other price indicators, continues to suggest an ongoing gradual easing in inflation pressure, but also that there is still some way to go in the inflation moderation when we look at the consumer-facing components."
