The retail sector has once again lagged behind the broader economy in the latest business survey released by National Australia Bank, which measured conditions during crucial December trading.

While the closely-watched and well respected NAB Business Confidence Index rose by 4 points to +11 for the month, the highest-level sine last July, retail remained slightly negative with a -2 index score in seasonally adjusted terms.

NAB said profitability and trading conditions within all sub-sectors of retail were negative, while employment conditions across the industry was ‘strongly negative’.

“Final retail prices also weakened sharply in December into negative territory, and are running at a slower rate than labour costs and purchases costs, pointing to margin compression,” NAB said.

Retail prices, measured on a rolling quarterly basis, declined by 0.4 per cent in December, turning around inflation in November and October.

Although NAB’s Business Confidence Index for December has continued to be more upbeat for the retail sector, scoring just under 10 on the index.

“Retail firms remain surprisingly upbeat when it comes to confidence. It is not clear what is driving this confidence, but it has been relatively unwavering over the whole of 2017”, said NAB Group chief economist Alan Oster.

General business conditions were strong across all states, with NSW outperforming at +19 on the index and WA improving, but still lagging behind at +7.

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