Australian business conditions still remain robust in April amid economic headwinds thanks to resilient customer demand and a strong labour market.
While the drop continued a trend of gradual easing in business conditions, the index still stayed at above-average levels.
Across various industries, the level of conditions remained elevated, with significant increases in the transport and utilities (up 16 points) and the wholesale (up 14 points) sectors.
Tasmania, Western Australia and South Australia also saw strong growth in business conditions, while New South Wales, Queensland and Victoria recorded a fall.
NAB chief economist Alan Oster said the new survey indicated the ongoing resilience of the Australian economy amid high inflation and interest rate hikes.
“We continue to expect consumption growth to slow as the effect of higher rates further impacts households, but how quickly and how sharply this occurs remains uncertain.”
Meanwhile, Australian businesses continued to experience inflated operating costs during the month, with labour and purchase costs rising by 1.9 percent and 2.3 percent, respectively.
Overall business prices also climbed, albeit at a lower rate of 1.1 percent, down from 1.3 percent in March.
Additionally, inflation in the retail sector stood at 1.4 percent, down from 1.7 percent.
“There was some further easing in price measures this month even though cost pressures remain very high,” Oster said.
The chief economist added that the slowdown in price growth might signal further softening in inflation in the early part of the second quarter of 2023.
ANZ Bank economists said the movement in business prices was consistent with other evidence that inflation was decreasing.
However, they believed the price growth was still too high for the Reserve Bank of Australia (RBA) to comfortably bring inflation down to the two to three percent target range.
Slight Improvement in Business Confidence
During April, the NAB business confidence index increased by one point to zero index point due to a sharp rise in wholesale (up 11 points) and small improvements in finance, business & property, retail and construction.While sectors such as retail, wholesale, finance, business and property, and recreation and personal services reported negative sentiment in current economic conditions, other industries remained positive.
“Confidence is still below average but has stabilised around zero index points over recent months,” Oster said.
“A zero reading for confidence in the survey indicates that an equal share of firms are optimistic as pessimistic, which highlights how the outlook is finely balanced.”
Despite the slight improvement in business confidence, consumer sentiment soured following the latest interest rate hike on May 2.
The index measuring consumer confidence in their current financial conditions also fell four points to its second-lowest level on record since 2001, while confidence in current economic conditions dropped by 2.9 points.
ANZ senior economist Adelaide Timbrell believed the weak results were due to the RBA’s latest interest rate decision.
“Confidence remained below 80 for a tenth straight week, the longest stretch below 80 since the 1990-91 recession.”