A monthly gauge of Australian business activity stayed steady in February, but confidence among firms slipped into negative territory for the first time in almost a year, according to National Australia Bank's (NAB) latest survey.
The NAB measure of business conditions remained at +7 in February - matching the long-run average. Within that headline reading, the survey recorded a modest improvement in sales, with the sales sub-index edging up 1 point to +12. Profitability held at +4 while employment retreated slightly to +3.
Business confidence, a component of the survey that can be volatile month-to-month, fell by 5 points to -1. "Business confidence is now in negative territory for the first time in almost a year, likely reflecting some caution in the wake of the February rate hike," NAB analysts said.
The Reserve Bank of Australia raised its cash rate by 25 basis points to 3.85% in February, marking the central bank's first increase in two years. The rate move was taken in response to persistent inflationary pressures, the survey noted.
Cost dynamics in the survey showed a rebound in both labour and input expenses during February. Retail price inflation on a quarterly basis accelerated, climbing to 1.0% from the prior 0.3% reading.
On a more positive note for future activity, reported investment plans rose to their highest level in three years. Forward orders also increased markedly, trebling to an index reading of +6, which signals potential upside for demand ahead.
The survey was undertaken between February 23 and March 2. That timing means it captured only the earliest phase of the U.S.-Israeli attack on Iran and the related initial spike in energy prices, events that began to push costs higher after the survey window opened.
Overall, the data depict a business sector maintaining current activity while tempering expectations amid higher borrowing costs and renewed cost pressures. Sales and investment intentions point to resilience in demand, even as firms confront rising labour and input expenses and faster retail price growth.