Australian Business Activity Rebounds in December

SYDNEY (Reuters) – A measure of Australian business activity rebounded in December as Christmas demand helped the down-beaten retail sector, according to a survey released on Tuesday. However, confidence remained low as firms faced rising costs.

The survey from National Australia Bank (NAB) revealed that its index of business conditions rose by 3 points to +6 in December, recovering some of November’s 5-point decline. The confidence index edged up slightly to -2 from -3.

Sales improved by 3 points to +9, while profitability rose by 4 points to +4. The employment index increased by 1 point to +4. Positive conditions were noted in all industries except transport, utilities, construction, and wholesale.

“Conditions remain strongest in services sectors,” stated Alan Oster, NAB’s chief economist. “Most industries recorded an improvement in business conditions, with retail entering positive territory for the first time since November 2023.”

For much of last year, consumer demand was weak due to high mortgage rates and cost-of-living pressures affecting spending power.

The Reserve Bank of Australia (RBA) maintained interest rates at 4.35% throughout the year. However, markets speculate that rate cuts could happen as early as February due to a slowdown in inflation.

The NAB survey indicated that purchase costs increased in December, but labour costs slowed down to a quarterly growth of 1.4%, despite a strong labour market.

“The easing in labour cost growth, coupled with improved employment conditions, suggests that wage pressures are continuing to soften,” Oster added.