SYDNEY, Dec 13 (Reuters) – Australian businesses turned to a downbeat outlook for the year for the first time in November as they worried that rising inflation and interest rates would take their toll on consumers for some time to come even as sales and profitability remained strong .
A survey by National Australia Bank Ltd (NAB) (NAB.AX) on Tuesday showed its index of business conditions fell 2 points to +20 in November, but remained well above the long-term average.
But the confidence index fell 4 points to -4, touching negative territory for the first time since December. That means the gap between the two indicators is the widest in any month since March 2020, the early days of the COVID-19 pandemic.
“Overall, surveys showed the economy grew strongly in November, with consumers still spending ahead of Christmas,” NAB chief economist Alan Oster said.
“However, businesses are increasingly pessimistic about the future as they look ahead to a global slowdown and periods of weak consumption as rising inflation and interest rates weigh on households.”
The NAB survey showed business activity beat all expectations for several months despite the Reserve Bank of Australia (RBA) raising interest rates by a total of 300 basis points to a 10-year high of 3.1%.
Austerity policies have hit consumer sentiment hard, but spending has held up well as the unemployment rate is near a five-year low of 3.4%.
NAB’s survey continued to show resilience in demand, with its sales indicator slipping 2 percentage points to a still very strong reading of +28, well above pre-pandemic levels.
Businesses are running smoothly, with capacity utilization just below the historical high of 85.2%.
Profitability edged down 1 point to +20, while the employment index also fell 1 point to +13, still high from a historical perspective.
Labor costs rose slightly that month, and both production costs and retail prices rose.
NAB’s Oster said sentiment was negative across many sectors, from retail to utilities.
“However, it remains to be seen whether and how often these concerns materialize, and we will continue to monitor spending trends closely in the coming months,” Oster said.
Reporting by Stella Qiu; Editing by Kenneth Maxwell
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