SYDNEY, Feb 10 - A broad measure of business activity in Australia moderated modestly in January as companies reported weaker sales and profits, according to a monthly survey from the National Australia Bank (NAB). At the same time, firms signalled a meaningful easing in cost pressures, which could be a constructive development for inflation trends.
The NAB’s index of business conditions fell 2 points to +7 in January, reversing a gain recorded in December. The survey’s business confidence indicator, which is typically more volatile, inched up by 1 point to +3.
On the components of activity, the measure of sales declined 6 points to +10, a level NAB noted is consistent with its long-run average. Reported profits slipped 3 points to +8. Employment remained unchanged at +5 for the third consecutive month, which the survey said points to resilience in labour demand.
The survey was completed before the Reserve Bank of Australia last week raised interest rates by a quarter point to 3.85% - the central bank’s first increase in two years - in an effort to rein in persistent inflationary pressures.
Importantly for price dynamics, the NAB findings showed both labour and input cost measures eased in January. Quarterly retail price growth also slowed, decelerating to 0.3% from 0.5% in December.
"Measures of cost and price growth in the survey fell to new post-pandemic lows," said Michael Hayes, an economist at NAB. "Overall, the January survey showed the economy has retained most of its momentum gained through the past year and the level of activity remains high, notwithstanding some easing in capacity utilisation over recent months."
Taken together, the January readings indicate that while activity cooled slightly, underlying demand in the labour market held up and cost pressures showed marked moderation. The survey therefore portrays an economy that has largely maintained the momentum built over the prior year, even as certain capacity measures have softened in recent months.