More signs of economy slowing – but will it fix inflation?
Tuesday, 11 March 2008
Mike Preston, economics editor
Declining profits and rising wage costs are causing business owners to be pessimistic about their prospects, according to two new surveys released today. And new jobs data suggests wage pressures could be about to moderate.
The NAB business survey reveals that business conditions declined significantly in February, driven primarily by a large fall in profitability.
NAB’s profitability index fell five points in February to sit just eight points above the line separating negative from positive profit growth.
Business confidence failed to recover from last month’s big dip, and remains two points below the line separating general optimism and general pessimism.
And, worryingly, the slowdown does not yet appear to be having much impact on the causes of inflation, with annual wage growth unchanged on a high 5.1% and retail prices pressures up 0.2% for February.
The Dun & Bradstreet business survey for February returned similar findings, with retail sales and profit expectations both declining from January.
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But while the respondents to Dun & Bradstreet’s survey also reported continuing wage pressure, they did show an expectation that retail prices growth will ease, albeit from currently high levels.
But business owners hoping for some relief on the wage growth front will take some hope from ANZ job advertisement data released today showing the number of job ads declined by 2% in February.
The total number of advertisements in February remains 24.4% higher than 12 months ago, however.
There are few signs of significant slowing on the housing front, with new housing finance figures released today showing the seasonally adjusted value of new housing commitments increased by 3.7% in January.
“The residential market remains tight in an environment of strong demand. However, with building approvals now beginning to fall under the weight of higher interest rates the residential housing market is becoming tighter than ever,” ANZ economist Alex Joiner says.
On the markets today, at 12.40pm the S&P/ASX200 is down 1.3% on yesterday’s close to 5114.3 and the Australian dollar is trading at US91.58c, down significantly from yesterday’s US92.72c close.