Retail business conditions hit nine-month high

Chinese-tourist-shopperBusiness conditions in the retail sector have hit a nine-month high in trend terms as the economy begins to show signs of inflationary pressures, according to National Australia Bank.

NAB’s business confidence index has fallen six points in March, reversing a record high score of +21 in February amid US President Donald Trump’s tariff announcements.

The monthly survey found that retail conditions have continued to lag behind other industries as trade conditions (sales), profitability and employment conditions deteriorated slightly over the month.

But in trend terms retail is on the up, NAB Group chief economist Alan Oster said.

“While retail continues to underperform, on a trend basis it reached its highest level in nine months,” he said.

Retail prices declined by .1 per cent in March after a .2 per cent gain in February and a .4 per cent increase in January, but Oster said that purchase cost growth continues to move higher, a sign that inflation could be on the way.

“The gradual trend rise in purchase costs provides a tentative sign of inflationary pressures, although it would need to keep rising to provide a convincing signal that core CPI inflation is about to move back within the RBA’s target band” said Oster.

NAB’s outlook for the Australian economy remains unchanged, with Oster saying that business conditions above historical averages indicate a stronger growth picture for the economy in the coming quarters.

“The Survey employment index is pointing to strong jobs growth which should reduce unemployment and put gradual upwards pressure on private sector wages,” he said.

“We expect that towards the end of this year the RBA will be in a position to start increasing the current emergency low policy rate although it will depend heavily on the data flow – particularly for wages and inflation – and the risk is that any action by the RBA will be delayed” Oster continued.

The figures come after a better than expected rise in retail turnover in February and several other indicators that conditions in the retail sector are improving in recent months.

Although economists remain cautious and are waiting to see whether the increases are sustained.

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