© Reuters. FILE PHOTO: A man carries several shopping bags as he walks along George Street in Sydney’s central business district (CBD) Australia, February 5, 2018. Picture taken February 5, 2018. REUTERS/Daniel Munoz/File Photo
SYDNEY (Reuters) – Australian business conditions remained resilient in February with sales and employment strong, even as confidence took a turn for the worse amid high inflation and rising interest rates.
The survey from National Australia Bank (OTC:) Ltd (NAB) released on Tuesday showed its index of business conditions dipped one point to +17 in January, still well above its long-run average.
The volatile measure of confidence fell back to -4, erasing January’s bounce to +6.
“Overall, the survey confirms the ongoing resilience of the economy through the first months of 2023, though we continue to expect a more material slowdown in demand later in the year when the full effect of rate rises has passed through,” said Alan Oster, NAB’s chief economist.
The survey paints a mixed picture for the Reserve Bank of Australia (RBA) which cited the strength of business activity as one reason it hiked interest rates to a decade-high of 3.6% this month.
Markets had thought another two hikes were likely, until turmoil in the U.S. banking sector radically altered thinking on policy tightening worldwide.
Now, swaps and futures imply only a minor chance the RBA will lift rates at its April meeting, and suggest it could be done tightening altogether.
The survey was conducted from Feb. 20 to 28, so it missed the recent chaos in financial markets after Silicon Valley Bank’s collapse.
Conditions were generally upbeat with the survey’s measure of sales at a very high +27 in February, supported by historically low unemployment and rapid population growth.
Measures of employment edged up 1 point to +11, while profitability eased a touch to +14.
The survey’s measure of labour costs ticked up to a quarterly rate of 2.8%, but retail price growth eased to 1.9%.
A new report released by Australia’s National Australia Bank on March 28th has shown positive signs for the Australian economy despite waning consumer confidence.
The monthly Business Survey revealed that business activity remained exceptionally strong in February, comfortably staying above average for a second month in a row. Overall conditions increased for the second month in a row, with trading, profitability and employment all showing improvement.
At the same time, consumer confidence hit the lowest level since 2013 which is putting pressure on businesses. However, there are some hopeful signs that the large fall in consumer spending might be slowing. Recent data from the Australian Bureau of Statistics revealed that Australian households have continued to spend on travel and hotels as well as restaurant meals despite weak consumer confidence overall.
The report indicated that businesses across all sectors are beginning to invest in online infrastructure to ensure they are optimising the potential of digital technology. It also showed that there was a positive trend in small business confidence which is the backbone of the economy.
In conclusion, strong business activity in February despite waning consumer confidence suggests that the Australian economy is showing resilience. It is expected that the government’s commitment to developing innovative digital solutions and investing in small business will help to boost consumer confidence and in turn support further improvement in the economy.