Australia's business conditions improve slightly in February: NAB

While forward orders remained stable overall, retail orders saw a notable decline, reflecting continued softness in conditions and confidence. Capacity utilisation also eased slightly to 81.9 per cent, though it remains above average, as per a survey by NAB.

The survey indicates that activity levels remain below average, and ongoing input cost pressures continue to outpace output price growth, highlighting persistent challenges in the business sector despite some economic recovery in the second half of 2024, NAB said in a press release.

“Business conditions rose marginally in February, with 1-point increases in both the trading and profitability sub-components. Conditions were mixed across industries, mining conditions improved from last month but remain at very weak levels, while gains were seen in construction, transport and utilities, and recreation and personal. Conditions declined in all other industries,” said Alan Oster chief economist at NAB.

“Conditions were largely unchanged in February. In trend terms, conditions remain strongest in the services sector but are now weakest in mining which has had a weak start to 2025. The lift in confidence seen last month was not sustained into February and is now well below average again. This was despite the improvement seen in fourth quarter (Q4) gross domestic product (GDP) data and the Reserve Bank of Australia’s (RBA) first rate cut, which suggests that businesses continue to be cautious about the outlook,” added Oster.

Purchase cost growth increased from 1.1 per cent to 1.5 per cent in quarterly equivalent terms, while labour cost growth eased from 1.7 per cent to 1.5 per cent, indicating a continued moderation in wage price pressures. Final product price growth declined from 0.8 per cent to 0.5 per cent, whereas retail price inflation remained stable at 1.0 per cent. Lingering cost pressures continue to impact business profitability, with profitability conditions remaining well below the long-run average. This is likely contributing to weaker business conditions and confidence.

ALCHEMPro News Desk (SG)