AUSTRALIA DATA: Private Sector Continues Struggling, Inflation Not Contained Yet

The headline components of the August NAB business survey deteriorated with confidence down to -3.9 from +0.7 and conditions to +3.3 from +6.0, the lowest since January 2022 and below the historical average. Q2 GDP showed that the private sector is currently struggling and these results suggest that continued in Q3. However, cost indicators remain high but some price rises are easing, monitoring still needed.

• The drop in business conditions was driven by all three components, trading, profitability and employment which fell to 1.1 from 6.8 but still above June. They are all below the series average. Forward-looking orders were weak but steady at -4, while exports improved slightly to -0.7 from -3.0.

Australia GDP y/y% vs NAB business conditions

• The price/cost indicators were mixed with labour costs easing to 1.7% 3m/3m from 2.4% in July, but still above the series average. Despite continued weak retail sales, retail inflation picked up to 1.2% from 1.0% and well above the average since 1997.
• Purchase cost inflation increased to 1.6%, highest since May, but final product price rises eased to 0.6%, lowest since February 2021, signalling that it is becoming harder to pass higher costs onto customers. The series is now in line with the historical average.

Australia NAB price/cost components

Source: MNI - Market News/Refinitiv