By James Glynn
SYDNEY–Australian business activity remains resilient despite the vice-like grip that rising mortgage interest rates is applying to household budgets, and growing concerns around China’s misfiring economy.
The National Australia Bank’s business conditions index rose to +13 index points in August from +11 in July, remaining well above average levels, while confidence readings also nudged higher.
The data further supports widening expectations that the commodity-rich Australian economy is on track to avoid a recession over the coming year, but that strength may delay interest rate cuts until further than expected into 2024, or even stoke the case for the Reserve Bank of Australia to raise the official cash rate further this year.
The strength in business activity follows a three-month pause in interest-rate hikes by the RBA, although it has warned further increases are possible.
Measures of trading conditions, profitability and employment all rose, with a broad-based uptick record in conditions across most industries, NAB said.
Capacity utilization across the economy also rose back above 85%, the data showed.
Confidence and forward orders measures both edged up though they remain below average, weighed down by deep negatives in the retail sector, NAB said.
Worryingly for the RBA, cost and price-growth measures remained high in the survey. Still, labor-cost growth pulled back from a spike in July, the survey showed.
Overall, the figures suggest that the economy remained strong in the third quarter, said Alan Oster, chief economist at NAB.
Confidence edged up slightly to +2 index points in August from +1 point in July, and leading indicators strengthened, he added.
Business confidence has risen back into positive territory over the past two months, though is still a little below average, Oster added.
“Businesses continue to report very high levels of capacity utilization suggesting that, even with growth slowing, the balance of supply and demand in the economy remains very tight overall,” he added.
Write to James Glynn at [email protected]; @JamesGlynnWSJ
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