Business conditions bounce back in December: NAB
A rise in business conditions during the last month of 2024 has seen conditions almost return to their long-run average, according to a recent NAB survey.
Business conditions in December increased by 3 points up to +6 index points, largely reversing the fall in conditions seen in November, according to the NAB Monthly Business Survey for December.
The NAB report indicated that most industries recorded an improvement in business conditions, with retail entering positive territory for the first time since November 2023.
Business conditions overall have almost returned to their long-run average level.
NAB chief economist Alan Oster said the uptick in retail conditions 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,” Oster said.
Conditions remain strongest in the service sectors, he added.
Business confidence saw a slight increase of 1 point, up to -2 index points, and remains well below average levels.
Confidence by industry was mixed, with a sharp uptick in retail industry confidence and large declines in mining and construction.
“Confidence rose in November but remains well below average,” Oster said. “Confidence has been below average since early 2023, with this trend holding at the end of last year.”
Forward orders edged up 3 points to -2 index points in December. There were notable improvements in mining and retail orders over the month, but both remain the weakest of all industries in trend terms.
Capacity utilisation rose to 82.8 per cent in December, still well above its long-run average of 81.3 per cent. Capex was largely unchanged but also remains well above average.
“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”.
Purchase cost growth was slightly higher in December, edging up to 1.5 per cent in quarterly equivalent terms. Labour cost growth was slightly lower at 1.4 per cent in quarterly equivalent terms.
“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 ticked up by 0.3 points to 0.9 per cent in quarterly equalised terms. Retail prices edged up slightly to 0.7 per cent.
“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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