Business, consumer confidence leap as inflation pressure eases
Business confidence is the highest in two years and consumer sentiment has recovered from its mid-year lows, new surveys have shown.
Business confidence has lifted to the highest level since early 2023 and consumer confidence rose again this month, recent surveys show, suggesting easing inflationary pressures and a bullish economic outlook.
The NAB Business Confidence Index, released on Tuesday, jumped sharply to 5 points last month from around zero, where it had been hovering for an extended period.
The improvement in confidence was broad-based across industries, while business conditions remained stable at 7 index points.
“Confidence spiked in the month after an extended period of below-average reads,” Gareth Spence, NAB Australian Economics lead, said.
“While it’s just one month, this is an encouraging sign alongside a tentative improvement in forward orders.”
The survey’s results suggested “an ongoing gradual easing in inflation pressure”. Input cost pressures eased further during the month, while labour cost growth slowed further to 1.4 per cent in quarterly equivalent terms, down from 1.9 per cent in September.
“Input price growth continues to moderate but does remain a little elevated,” Spence said.
“However, how this translates into broader inflation in the economy is evolving. It appears that businesses are less able to pass on cost pressures as consumer demand growth slows.”
Purchase cost growth also eased to 0.9 per cent from 1.3 per cent. Output price growth edged down to 0.5 per cent in quarterly equivalent terms.
Of the consumer-facing sectors, retail price growth rebounded in the month to 1.1 per cent while recreation and personal services price growth tracked sideways at 0.9 per cent.
Meanwhile, a consumer sentiment survey released by Westpac found households were becoming more optimistic about the economy, with the 12-month economic outlook subindex crossing into positive territory for the first time since the post-COVID-19 pandemic recovery.
The overall consumer sentiment index also rose 5.3 per cent to 94.6 in November, building on last month's gain, and was now up 14.4 per cent from its mid-year lows. Matthew Hassan, head of macro-forecasting at Westpac, said consumers were becoming “cautiously optimistic”.
“The mood does look to be improving and is providing some more positive signs for retailers ahead of the all-important Christmas high season. Certainly, spending plans are looking less austere than in previous years,” Hassan said.
However, he noted that consumer confidence showed volatility during the survey week, particularly following the US election, suggesting some fragility in the recovery.
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