Australia’s NAB Business confidence fell sharply by five points to -1 February, slipping into negative territory for the first time in eleven months. In contrast, business conditions held steady at +7, roughly in line with the long-run average. The split suggests that firms are still experiencing stable trading conditions but are becoming increasingly cautious about the outlook.
Cost pressures also showed signs of firming again during the month. Labour costs rose to 1.5% on a quarterly equivalent basis. Retail price growth accelerated to 1.0% from just 0.3% previously. The rebound in price indicators suggests that underlying inflation pressures in the business sector may still be present.
The deterioration in sentiment has largely been attributed to the RBA’s 25 basis point rate hike in February to 3.85%, which marked the first increase in two years. NAB analysts noted that the survey only partially captured the subsequent escalation in Middle East tensions and the surge in global energy prices, meaning business confidence could face additional pressure in the months ahead.
