A crane lifts building materials past scaffolding at a construction site in central Sydney, Australia. REUTERS/David Gray/file photo
SYDNEY – Australian economic conditions once again proved resilient in August with a broad rise in sales, profits and employment, while inflationary pressures remained high, a result that could strengthen the case for further monetary tightening to control inflation.
A National Australia Bank Ltd (NAB) survey released on Tuesday showed its business conditions index rose to +13 in August, following an upward revision from +11 in July. Its volatile confidence measure rebounded 1 point to +2.
The survey’s employment measure gained 3 points to +9, while the sales index gained 1 point to +18 and profitability rose 2 points to +13.
Futures orders, an indicator of the demand outlook that has been sluggish, rose a point to a flat figure, while capacity utilization returned above 85 percent, approaching all-time highs .
READ: Australia July trading conditions remain firm and costs rise again
“There was a notable rise in the employment index, well above the long-term average, suggesting that demand for labor remained strong during the second half of the year,” said l NAB chief economist Alan Oster.
“Price growth also remains elevated, reflecting the considerable cost pressures businesses face, as well as the continued resilience of demand… We expect inflation to remain elevated in the third quarter.”
READ: Australia inflation slows more than expected in second quarter
Indeed, labor cost growth was 3.2 percent higher over the past three months, a slight slowdown from the previous figure of 3.7 percent, while labor costs purchases increased from 2.8 percent to 2.9 percent.
The Reserve Bank of Australia has suspended rate hikes for the third month in a row, after raising its key rate by 400 basis points since May last year, but warned further tightening may be needed to curb inflation.
READ: Reserve Bank of Australia to make final rate hike in fourth quarter, economists say
A majority of economists still expect the RBA to raise monetary policy one last time before the end of the year, while markets suspect the tightening cycle may well be over.
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