Australia business activity booms in July, costs surge

By Wayne Cole

SYDNEY (Reuters) – A measure of Australian enterprise confidence rebounded in July as gross sales and earnings held up surprisingly effectively within the face of rising rates of interest and excessive inflation, although corporations additionally reported report prices amid provide constraints.

Tuesday’s survey from Nationwide Australia Financial institution Ltd (NAB) confirmed its index of enterprise circumstances climbed 6 factors to +20 in July, effectively above its long-run common.

Its measure of confidence bounced 5 factors to +7, reversing June’s decline and leaving it simply above the long-run common.

“The power in circumstances remained broad-based throughout states and industries, with a notable pickup within the development sector,” mentioned NAB group chief economist Alan Oster.

“General, the survey means that regardless of international and home financial headwinds, demand has remained robust – and inflationary stress continues to construct suggesting that inflation is but to peak.”

The survey’s measure of buy prices climbed to a report excessive of 5.4%, whereas labour prices rose 4.6% at a quarterly tempo. Progress in retail costs picked as much as 3.3%, with product costs up 2.7%.

Surging inflation has led the Reserve Financial institution of Australia (RBA) to hike 4 occasions since early Could, lifting charges by 175 foundation factors to 1.85% and warning of but extra forward.

Markets are leaning towards one other 50 foundation factors in September and charges as excessive as 3.25% by 12 months finish.

That hawkish outlook has soured the buyer temper, with two surveys out on Tuesday displaying sharp falls in confidence amid a lot pessimism on the financial outlook.

But NAB’s survey continues to indicate resilience in precise demand, with its measure of gross sales leaping 8 factors to an traditionally excessive +27 in July.

Profitability rose 4 factors to +17 and the employment index gained 6 factors to +17, a powerful studying that prompt the jobless fee may drop even additional having already fallen to a 48-year low of three.5%.

Corporations additionally seemed to be operating flat out with capability utilisation surging to a report 86.7%, from 84.9% in June.

(Reporting by Wayne Cole; Modifying by Sam Holmes)