In December, Australia's business landscape demonstrated a recovery, particularly within the retail sector, which entered positive territory for the first time since November 2023, according to a report from the National Australia Bank released on Tuesday.
The business conditions index increased by three points, reaching +6, nearly aligning with the long-term average. This upturn was significantly attributed to an improvement in retail conditions, marking their first positive reading since November 2023.
Alan Oster, Chief Economist at NAB, noted that service sectors still reported the strongest conditions. The positive shift in retail conditions suggests a potential rebound in consumer spending at the close of 2024. Nonetheless, Oster noted, "We will need to observe whether this progress continues into 2025."
Meanwhile, the business confidence index rose by one point to -2 in December, but it still fell short of the average level. Forward orders improved by three points, with notable surges in the mining and retail sectors, although they continued being the weakest among all industries in terms of trends.
Capacity utilization increased to 82.8 percent in December, significantly exceeding its long-term average of 81.3 percent, while capital expenditure showed little change over the month.
On the pricing front, the survey indicated a slight rise in purchase cost growth, reaching 1.5 percent on a quarterly equivalent basis. Labor cost growth, however, dipped to 1.4 percent. Concurrently, output price growth saw a marginal increase of 0.3 percentage points, reaching 0.9 percent, and retail prices experienced a slight uptick to 0.7 percent.
Oster remarked, "The rise in purchase cost growth and finished product prices highlights ongoing price pressures faced by businesses."
