Australia’s business conditions took a downturn in January, reversing the previous month’s gains, as trading conditions and profitability weakened, according to the latest National Australia Bank (NAB) Monthly Business Survey.
While employment showed a slight increase, overall economic momentum appeared to soften. However, business confidence improved, rising by six points to +4, with gains recorded across most industries. Despite this, confidence remained weakest in the retail and wholesale sectors, both at -6 index points. This shift brought business confidence and conditions closer together after two years of divergence.
Despite the decline in business conditions, capacity utilisation remained above average at 82.0 per cent, although it continued its gradual downward trend. Labour cost growth edged up to 1.8 per cent, while output price inflation remained steady at 0.8 per cent. Retail price growth saw a marginal increase to 0.9 per cent, as per the survey.
The survey revealed mixed conditions across industries. Retail saw contraction, in contrast, wholesale and manufacturing reported improvements. Services continued to show the strongest trend performance, whereas manufacturing remained the weakest sector.
State-level data indicated that business conditions weakened in most regions, except for Western Australia, which recorded a six-point increase, and South Australia, which remained unchanged. Conditions were weakest in Victoria, while Queensland continued to lead with the strongest performance.
Forward orders declined slightly, falling by one point to -3, while capital expenditure dropped by seven points to +4. Although demand levels have shown resilience, the broader economic growth outlook remains subdued. Recent consumption data from late Q4 suggested a rebound in household spending, but sustained improvement in consumer activity is likely needed to drive a more comprehensive recovery in business conditions.
“Conditions weakened in the first read of the year. This was driven by weaker trading and profitability conditions, while employment conditions marginally improved. Of note, retail conditions pulled back after strong gains in December,” said NAB chief economist Alan Oster.
Confidence rose six points to +4 but remained weakest in retail and wholesale (-6).
Capacity utilisation fell to 82.0 per cent.
Retail contracted while wholesale and manufacturing improved.
Despite resilient demand, economic growth remains subdued.
Fibre2Fashion News Desk (HU)