Wednesday, February 1, 2023
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Lots of waiting and seeing in NAB survey

Business conditions and confidence continue to show signs of the economy slowing but conditions especially are still buoyant and showing a solid growth pace, according to the first survey of business activity for 2023 from the National Australia Bank.

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At the same time there could be more signs that the inflationary surge that disrupted 2022 may have peaked.

The NAB survey results came a day before the release (Wednesday) of the December quarter and monthly Consumer Price Index data by the Australian Bureau of Statistics.

Economists think the quarterly CPI will be between 7.5% and 7.8% (7.3% in the year to September) and that the monthly indicator for December could be around 7.8%, up from 7.3 in November.

The NAB said that while business conditions fell in December – the third successive decline – they remain well above average levels at plus 12 index points “reflecting the extraordinary strength seen in early-to-mid 2022.”

The NAB said business conditions fell 8pts to +12 index points. All three subcomponents eased, with trading conditions down by 10pts, to +18 index points, profitability down 8pts to +12 index points and employment down 5pts to +8 index points.

NAB Chief Economist Alan Oster said in commentary with the survey that “the main message from the December monthly survey is that the growth momentum has slowed significantly in late 2022 while price and purchase cost pressures have probably peaked”.

“Business confidence rose 3pts to -1 index points but remains well below average. Confidence rose in all industries with the exception of transport & utilities. By state, there was an improvement in WA, NSW and Vic while Qld edged higher and Tas was flat. SA recorded a decline in the month,” according to the bank.

“After turning negative last month, confidence remained well below average and just into negative territory despite a small improvement in the month,” said Mr Oster.

“The gap between current business conditions and business confidence remains wider than usual though has narrowed. Ultimately while on average business reports still healthy activity at present, they don’t necessarily expect that to last.”

“With confidence still in negative territory (and well below average) and forward orders moderating further in the month, there are signs that conditions may ease further,” the NAB forecast on Tuesday.

And while high prices continue to be a problem for business, suggesting “notable pressure on both inputs – including labour costs – and product prices,” there is a hint that the worst may behind us.

“However, all three measures continue to ease and, if that trend continues, we could well have already seen the peak in inflationary pressures in Q4,” the NAB said.

“Overall, the survey continues to point to a healthy level of activity with above average conditions and elevated capacity utilisation but a slowing in momentum with most indicators pulling back over the past three months or so – in line with our expectations for a slowing as the post-COVID rebound fades and rate rises continue to flow through,” the NAB said.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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