Business conditions fell again in December, confidence up: NAB

The news: Business conditions continued to ease in December but remained around the long-term average by the end of 2023, according to NAB's monthly business survey. Confidence increased in December but still remains slightly negative.

The numbers: Business conditions fell 2pts to +7 index points, holding just above the long-run average. By sector, there were significant falls in conditions in manufacturing (-16 points) and construction (-12 points), while recreation and personal services lifted 10 points and transport and utilities rose 9 index points. The eight point lift in business confidence was led by mining (+28 points).

The context: There are increasing signs Australia's inflation inflation battle has begun to turn, with labour and purchase cost growth easing in December. NAB noted conditions in retail remained weak but they were still elevated in services. All eyes will be on quarterly CPI data next Wednesday, as the RBA looks for data on the efficacy of its rate-hiking cycle on services inflation, which so far has remained sticky.

What they said: "Overall, the survey results show that economic growth had eased considerably by the end of 2023 after performing better than expected for much of the year, and this slowing is beginning to translate into improvement in inflation indicators," NAB chief economist Alan Oster said in the report. "Nonetheless, businesses remain cautious about the outlook with growth likely to remain subdued for the time being."