AUSTRALIA DATA: NAB Business Survey - Upside Inflation, Downside Growth Risks

There seemed some stabilisation in the private sector in May with NAB business conditions stable at +3 and confidence improving substantially to -14 from -23. However, Q2 averages are signalling growth slowed in the quarter. Price/cost increases moderated from April but remained elevated compared to pre-Iran War rates and are signalling upside risks to Q2 CPI. The RBA remains alert to signs of a greater or faster pass through of higher costs to consumers and while the NAB survey shows some easing in the size of price rises they remain inconsistent with the inflation target.

• In terms of costs, labour costs moderated to 1.5% 3m/3m from 1.7%, while purchase costs were still strong at 2.6% 3m/3m but down from April’s 4.5%. Retail price rises remained elevated at 1.5% 3m/3m compared with the Q1 average at 0.6% and final product prices at 0.9% compared to Q1’s 0.8%.

Australia NAB final product prices vs CPI y/y%

Source: MNI - Market News/LSEG

• Business conditions rose slightly to 3.0 from 2.8 helped by better trading conditions (+0.7pp to 7.9) and employment (+0.4pp to 1.6) while profitability deteriorated (-0.7pp to -0.7 – the first negative in a year). The survey suggests hiring slowed in Q2.
• The outlook remained negative with forward orders at -0.4 but that was better than both March and April. Export sales improved to +3.2 from April’s -10.3, the best since January and suggesting some global economic resilience. Exports were also positive at +0.7 after -1.8.

Australia NAB business conditions vs GDP y/y%

Source: MNI - Market News/LSEG