Australian business conditions fell to the lowest in two-and-a-half years in August with the outlook for jobs taking a hit, a survey showed, while there was mixed news on inflation pressures subsiding.
The survey from National Australia Bank (NAB) showed its index of business conditions fell 3 points to +3, the lowest since January 2022 and below its long-run average. The more volatile business confidence index dropped 5 points to -4, the lowest so far this year.
Within the conditions measure, the index of employment plunged from +7 to +1 after a brief uptick in July, suggesting weak sales and profitability could be feeding into labour demand.
“That suggests the period of very strong private sector labour demand seen throughout the post-Covid period may be coming to an end,” said NAB Chief Economist Alan Oster. “Conditions are now fairly clearly below average compared to the history of the survey which reflects the weakness seen in the private sector broadly as the economy has slowed.”
The Reserve Bank of Australia (RBA) has held interest rates steady at 4.35% since November, judging the current rate restrictive enough to bring inflation back to its target band of 2-3% while preserving the employment gains. However, underlying inflation stayed sticky at 3.9% last quarter, a reason that policymakers have all but ruled out an interest rate cut this year.
Markets are still wagering there is an 80% probability that the RBA could cut in December, in part due to expectations the U.S. Federal Reserve will ease policy this month, joining most other major central banks. The survey found some mixed news on the inflation measures, with growth in labour costs easing to a quarterly rate of 1.7% from July’s 2.4% which was boosted by the increase in minimum wages in the month.
However, gains in purchase costs remained elevated at 1.6% in the quarter, up from July’s 1.3%, while retail prices grew at 1.2% for the three months ending August, up from 1.0% in July.
