Signs Of Easing Price Pressures Despite Labour Cost Rise

The July NAB business survey continued to show that conditions have deteriorated but are holding up. Confidence fell 2 points to 1, but this series has been oscillating around zero since December. Conditions improved 2 points to +6, around a point below the series average. Despite a pickup in labour costs, the rise in final product prices was steady.

• The 3-month change in labour costs picked up 2.5% in July from 1.5%, the highest rate since November driven by the July 1 3.75% minimum wage increase and new agreements beginning from that date too. Despite this the rise in final product prices was unchanged at 0.7%, signalling some difficulty in passing higher costs onto customers, in line with observations from the RBA. Purchase costs eased to 1.1% from 1.3%, the lowest increase since February 2021. Some good news here for the RBA.

Source: MNI - Market News/Refinitiv

• The rise in business conditions was driven by increased employment intentions at 6.6 up from 0.0 in June and above the 2024 average signalling that the labour market is still likely to ease only gradually.

Source: MNI - Market News/Refinitiv/ABS

• Other survey details were quite weak though with trading down 2 points and profitability down 0.3. Forward orders remain negative at -4.1 but improved 2 points from June.
• The export picture was weak with exporters’ sales down to -14.5, the lowest since the Covid-impacted November 2020. There has been concern regarding China’s economic strength, Australia’s largest export destination.