NAB Survey Shows Solid Activity, Easing Labour & Price Pressures

The NAB measure of business conditions fell for the third consecutive month in December to its lowest since January 2022 but still well above the series average. However, business confidence improved 3 points to -0.8, which is still very low compared to the rest of 2022 and below average. Confidence and orders are signalling a further moderation in the months ahead.

• The NAB price components continue to show price pressures on both the input and output sides, but they are easing and pointing to a tentative peak in Q4 2022. Labour cost growth slowed to 2% in December from 2.8% the previous month and purchase costs to 2.5% from 3.9%. On the output side final product inflation moderated to 1.5% from 2% and retail to 2.3% from 2.8%.
• The survey is pointing to slower activity but at solid levels and continued tight capacity but with softening labour demand and price pressures, welcome developments for the RBA. NAB notes that the fading of the post-Covid demand bounce and higher rates are impacting business.
• The drop in business conditions was driven by all three of its components with trading conditions down 10 points, profitability -8 points and employment -5 points (lowest since January 2022). The move was broad-based across sectors and states.
• See press release here.