Australian business activity remains strong in August survey

Australian business activity remains strong in August survey

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SYDNEY (Reuters) – A gauge of Australian business confidence rebounded for a second month in August, as sales remained surprisingly strong in the face of rising interest rates and high inflation, while severe cost pressures showed some signs of abating.

Tuesday’s survey from National Australia Bank Ltd (NAB) (NAB.AX) showed that the business conditions index rose one point to +20 in August, well above its long-term average.

It fixed its confidence scale by 2 points to +10, which puts it above the long-term average.

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“Overall, the survey indicates that demand remained strong through August,” said Alan Oster, chief economist at NAB Group.

“We continue to expect inflation and higher interest rates to eventually start to affect household budgets more materially,” he added. “But so far, it seems that this dynamic has not yet taken hold.”

Rising inflation has raised the RBA five times since early May, raising interest rates by 225 basis points to 2.35% and warning of more to come.

Markets suspect the RBA may slow down a bit from here and lean about a quarter point in October.

A measure of purchase costs conducted by NAB showed some decline in August to 4.4%, from a record high of 5.3% in July. Labor cost growth also slowed to 3.5% at a quarterly pace, from 4.5%, while growth in retail prices held steady at 3.3%.

The survey continued to show resilience in demand, with the sales metric up 4 points to a very strong +30 in August, the highest in more than a year.

Businesses were still running flat with capacity utilization surpassing a record high of 86.3%.

Profitability fell by 2 points to +16, while the employment index also fell by 2 points to +16. Official figures showed that the unemployment rate fell to a 48-year low of 3.4% in July.

A separate survey of consumers from Westpac showed a rebound in confidence in early September, thanks in part to a strong labor market.

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Editing by Wayne Cole Editing by Shree Navaratnam

Our criteria: Thomson Reuters Trust Principles.

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