SYDNEY (Reuters) – Australian business conditions remained resilient in February with sales and employment strong, even as confidence took a turn for the worse amid high inflation and rising interest rates.
The survey from National Australia Bank Ltd (NAB) released on Tuesday showed its index of business conditions dipped one point to +17 in January, still well above its long-run average.
The volatile measure of confidence fell back to -4, erasing January’s bounce to +6.
“Overall, the survey confirms the ongoing resilience of the economy through the first months of 2023, though we continue to expect a more material slowdown in demand later in the year when the full effect of rate rises has passed through,” said Alan Oster, NAB’s chief economist.
The survey paints a mixed picture for the Reserve Bank of Australia (RBA) which cited the strength of business activity as one reason it hiked interest rates to a decade-high of 3.6% this month.
Markets had thought another two hikes were likely, until turmoil in the U.S. banking sector radically altered thinking on policy tightening worldwide.
Now, swaps and futures imply only a minor chance the RBA will lift rates at its April meeting, and suggest it could be done tightening altogether.
The survey was conducted from Feb. 20 to 28, so it missed the recent chaos in financial markets after Silicon Valley Bank’s collapse.
Conditions were generally upbeat with the survey’s measure of sales at a very high +27 in February, supported by historically low unemployment and rapid population growth.
Measures of employment edged up 1 point to +11, while profitability eased a touch to +14.
The survey’s measure of labour costs ticked up to a quarterly rate of 2.8%, but retail price growth eased to 1.9%.
(Reporting by Wayne Cole; Editing by Jamie Freed)