Business conditions edge higher in December: NAB
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The news: Business conditions rose in December, largely reversing the fall seen in November and almost returning to the long-running average, according to NAB's monthly business survey.
The numbers: Business conditions improved in December, up 3 points to +6 index points. Conditions improved across all industries except transport and utilities, construction and wholesale, including a notable uplift in retail conditions which re-entered positive territory for the first time since November 2023.
Business confidence went up slightly by 1 point to -2 index points, remaining well below average levels. Confidence by industry was mixed, with a sharp uptick in retail industry confidence and large declines in mining and construction.
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% in December, still well above its long-run average of 81.3%. Capex was largely unchanged but also remains well above average.
Purchase cost growth was slightly higher in December, edging up to 1.5% in quarterly equivalent terms. Labour cost growth was slightly lower at 1.4% in quarterly equivalent terms.
Output price growth ticked up by 0.3 percentage points to 0.9% in quarterly equalised terms. Retail prices edged up slightly to 0.7%.
The context: Most industries recorded an improvement in business conditions, with retail re-entering positive territory for the first time since November 2023.
However, conditions in retail remain significantly weaker than most industries, with services sectors continuing to outperform the goods sectors. Confidence also edged up but remains well below the long-run average – with forward orders following a similar trajectory.
Overall, the survey points to improvements across most activity measures, though confidence remains weak. Capacity utilisation increased slightly and continues to track at above average levels but has eased substantially from the levels seen through late 2022 and early 2023.
Most industries reported an uptick in both purchase cost and final product price growth in the month. Labour cost growth on the other hand continues to ease despite the ongoing strength in the labour market. The survey continues to show some resilience in activity but also that businesses continue to face a challenging cost environment amid slower output price growth in late 2024.
By state, conditions improved in most states except Western Australia. Conditions rose sharply in South Australia but it remains weakest of all states in trend terms.
What they said: "Conditions remain strongest in services sectors," said NAB's chief economist Alan Oster.
"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."
The source: NAB Monthly Business Survey
