In January, the National Australia Bank (NAB) survey revealed that business conditions in Australia softened, with the services sector experiencing a slowdown. This pushed the business conditions index down to +6, slightly below its long-term average of +7. Despite this, the measure of business confidence rose 1 point to +1, after a 7-point jump in December.
NAB Chief Economist Alan Oster noted that confidence remained weak due to ongoing pressures in the economy, including slowing growth and rising high costs. The survey showed that business sales decreased by 3 points to +11, while both profitability and employment fell by 2 points to +5. Capacity utilization also increased to 83.6% from 82.8%.
On the expenditure side, the survey showed that quarterly growth in purchasing costs reached 1.8% in January, while retail price growth eased back to +0.9% from +0.5% in December. Oster noted that while these price pressures remain firm, they are expected to ease in early 2024 as the economy continues to slow.
In response to these economic conditions, the Reserve Bank of Australia (RBA) raised interest rates to a 12-year high of 4.35% in an attempt to curb inflation. The RBA also warned that another increase in interest rates may be necessary despite the economic slowdown.
As businesses face pressure from rising costs and slowing growth, they continue to struggle with capacity utilization and profitability concerns. Meanwhile, consumers are feeling price pressures as retail prices rise and purchasing costs grow at an alarming rate.
The NAB survey highlights the need for continued attention on these economic challenges as businesses navigate through these uncertain times.
Overall, it seems like things are not looking great for Australian businesses at present with declining sales and profitability along with increasing costs leading to capacity utilization issues