SYDNEY (Reuters) – Australian business conditions held firm in October even as confidence slipped a little, a survey showed on Tuesday, a resilience that will be tested by higher borrowing costs following a rise in official interest rates last week.
The survey from National Australia Bank (NAB) showed its index of business conditions edged up 1 point to +13 in October, while confidence slipped 2 points to -2.
The sales index remained very strong with a 2 point rise to +20, while profitability increased 3 points to +12. Only employment eased, falling 1 point to +8.
“Business conditions remain healthy, picking up in October and still well above average,” said NAB’s chief economist Alan Oster.
However, he noted the measure of forward orders was much weaker, suffering a 2 point drop to 0 in October.
“Businesses clearly remain cautious about the outlook for the economy despite the resilience we are seeing,” Oster said.
Adding to the caution will be the Reserve Bank of Australia’s (RBA) decision last week to raise interest rates to a 12-year peak of 4.35% as it struggles to restrain inflation.
The NAB survey showed some easing in cost pressures in October, though from high levels.
Labour cost growth eased to a quarterly 1.8%, as did growth in purchase costs. Retail price growth held at a quarterly pace of 1.9%, though overall price growth eased to it lowest since mid-2020 at 1.0%.
“Inflation had been persistent through the middle of the year and the survey suggests this remained the case heading into Q4,” said Oster. “We still expect to see gradual moderation over time but it will be a protracted process, especially given the resilience of domestic demand thus far.”
(Reporting by Wayne Cole; Editing by Shri Navaratnam)