Confidence Weak & Volatile, Components & Costs Robust

After two months in positive territory, NAB business confidence fell to -4 in February from +6, driven by services and finance & property. The series has been volatile since June 2022. Business conditions were stable at a robust 17 after 18 in January with the strength broad based. While confidence was soft, the other components of the survey remained robust pointing to a further RBA hike in April if considered in isolation.

• Conditions in consumer-related sectors remained strong around +20, in contrast to depressed Westpac consumer confidence, while the business ones were around +10. Trading remained robust at 27, profitability eased to 14 from 18 and employment rose to 12 from 11, indicating labour demand remains strong.
• In terms of the forward-looking components, forward orders were down to 3 from 6 driven by wholesale but capacity utilisation remained high above 85%.
• Cost indicators in the survey remained elevated in February with labour costs rising for the second consecutive month to 2.8%, the highest since November 2022. However, prices were subdued with prices of final products stable at 1.6% and retail prices down to 1.9% from 2.5%, indicating that it is becoming harder to pass costs onto customers.
• Cost pressures in services remained elevated and showed less moderation than in retail. Labour costs have eased from their peaks in both sectors.