• Thu. Feb 29th, 2024

Australian Service Sector Slows Down, NAB’s Economist Warns of Weak Confidence

ByEditor

Feb 13, 2024
In January, Australian business conditions weaken, costs become an issue

The service sector in Australia experienced a slowdown in January, leading to a decrease in the index of business conditions to +6. This is just below its long-run average of +7. However, the measure of business confidence increased by 1 point to +1, following a 7-point rebound in December. Despite this, NAB’s chief economist Alan Oster noted that confidence remains weak due to ongoing pressures across the economy, including slowing growth and high cost growth.

The survey revealed that business sales eased 3 points to +11, while both profitability and employment dipped 2 points to +5. Capacity utilization also picked up to 83.6% from 82.8%. In terms of costs, the survey showed that quarterly growth in purchase costs edged up to 1.8% in January, while growth in retail prices rebounded to +0.9% from +0.5% in December. Oster mentioned that despite these price pressures remaining solid, they are expected to ease in early 2024 as the economy continues to slow.

In response to these economic conditions, the Reserve Bank of Australia (RBA) raised interest rates to a 12-year peak of 4.35% in an effort to restrain inflation. The RBA also warned that another rate hike might be necessary, despite the slowing economy.

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