NAB Indicators Signal Easing Price Pressures

The September NAB business survey showed that while the economy has slowed it is looking resilient (see MNI NAB Survey Shows Slowing But Resilient Economy). It also pointed to a significant easing in cost and price pressures, which should be good news for the RBA. Fuel prices were noted to have “risen noticeably” in this month’s RBA statement but it seems in wait-and-see mode as it is unclear if demand is strong enough to pass on higher costs to customers. With NAB purchase cost inflation down to its lowest since mid-2021, final product inflation has eased too.

• Costs and prices rose in Q3 with higher wages and petrol prices impacting the quarter but by September pressures had returned to their pre-July trend. This is consistent with the uptick in August headline inflation and there could also be a pick-up in Q3 CPI, but the survey is suggesting that it may be temporary. A large uncertainty though is global oil prices given current geopolitical tensions.

• NAB labour costs rose to 4% in July but have moderated to 2% in September, the lowest since November 2021. Purchase costs eased to 1.8% from 2.9% in August.
• As a result, final product price inflation is down to only 1% from 1.7%, the lowest since mid-2021. But retail prices held steady at 1.8%, which is still low compared to 2022 readings.

Source: MNI - Market News/Refinitiv