Conditions "now firmly around their long-run average level"
December saw a further easing of business conditions in December, according to a survey from National Australia Bank.
“Conditions eased in December and are now firmly around their long-run average level,” said NAB chief economist Alan Oster (pictured above). “Conditions started 2023 at a very elevated level but gradually eased over the year as the economy slowed. The decline in conditions in December was particularly notable in manufacturing and construction, but conditions rose in recreation and personal services and transport and utilities, so there are different movements occurring across sectors.”
Despite the overall decrease in business conditions, there was a notable rebound in business confidence in December. The NAB survey showed an eight-point increase in business confidence, although it still remained below the long-run average. This increase was led by the mining and retail sectors, while manufacturing saw a slight decline. In trend terms, most industries remained in negative territory, except for mining and transport and utilities.
“Overall, both confidence and conditions are softest in manufacturing, retail and wholesale which reflects that consumers have been cutting back on spending as time has gone on,” Oster said. “There was an encouraging pickup in confidence in the retail sector in December, but it remains to be seen if this will be maintained.”
Read next: CBA data shows December spending down 3.9%
The survey also revealed signs of easing in input cost pressures and inflation. Labour cost growth declined to 1.8% in quarterly equivalent terms, down from 2.3% in November. Additionally, purchase cost growth decreased to 1.6% from 2.5%. Overall price growth also eased, reaching 0.9%, with retail price growth slowing to 0.6%. These findings suggest a potential easing in the underlying pace of inflation.
The survey results reflect a considerable slowing of economic growth by the end of 2023, following a period of better-than-expected performance earlier in the year. This slowdown is starting to manifest in improvements in inflation indicators. However, businesses remain cautious about the future outlook, as growth is expected to remain subdued for the foreseeable future, NAB reported.
Another recent NAB survey found that Australians are becoming more concerned about their job security.
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