Retail rebounds into positive territory, but confidence remains below average
Business conditions in Australia improved in December, climbing three points to +6 index points, according to NAB’s latest business survey.
The increase nearly brings conditions back to their long-term average, with gains recorded across most industries and retail conditions notably returning to positive territory for the first time since November 2023. However, transport and utilities, construction, and wholesale sectors experienced declines.
“Conditions remain strongest in services sectors,” said NAB chief economist Alan Oster (pictured above). “But there was a noticeable improvement in retail conditions, which may reflect a pick-up in consumer spending at the end of 2024. We will have to wait and see whether this improvement is sustained over 2025.”
State-level results showed mixed trends. South Australia posted a significant increase, though it remains the weakest state in trend terms. Western Australia, on the other hand, saw a decline.
The NAB survey also showed that business confidence edged up one point in December to -2 index points but remains well below average levels. Confidence across industries was mixed, with a strong rise in retail offset by steep declines in mining and construction.
“Confidence has been below average since early 2023, with this trend holding at the end of last year,” Oster said.
Forward orders improved slightly, rising three points to -2 index points. While retail and mining showed notable gains in orders, both sectors remain weak in trend terms.
Meanwhile, capacity utilisation increased to 82.8% in December, well above the long-term average of 81.3%, reflecting resilience despite broader economic challenges.
“Capacity utilisation rose in the month and is still notably above its long run average despite the slow growth we have seen in the economy,” Oster said. “Nonetheless, capacity utilisation is well down on the levels seen through late 2022 despite only a small easing through 2024. This suggests that while the economy continues to rebalance, the process remains gradual.”
Labour cost growth eased slightly in December, dropping to 1.4% in quarterly equivalent terms. Meanwhile, purchase cost growth ticked up to 1.5%.
“The easing in labour cost growth at the same time employment conditions improve suggests that wage pressures continue to soften,” Oster said.
Output price growth rose to 0.9% in quarterly terms, while retail price growth edged up to 0.7%.
“The uptick in purchase cost growth and final product prices reminds us that businesses continue to face some price pressures,” Oster said.
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