Australian Business Confidence Survey Shows Rising Purchasing Costs

Highlights

• NAB Business Confidence Index increased from -1 to 0 in April.
• Business conditions slipped by 2 points to +14.
• AUD/USD rose to a post-report high of $0.67543.

It was a relatively quiet morning on the Asian economic calendar. However, Australian business confidence figures drew interest this morning.

The NAB Business Confidence Index increased from -1 to 0 in April versus a forecasted +1. While the headline figure drew interest, the sub-components also needed consideration. Focal points included Labor costs, purchase costs, final product costs, and retail prices. However, forward orders also drew interest.

According to the April survey,

• Business conditions slipped by 2 points to +14. Despite the downward trend, the Index remained above average.
• Leading indicators disappointed, with forward orders down from +3 to +1 and CAPEX falling by 2 points to +6.
• However, it was a mixed set of price and cost Indexes.
• Labor costs held steady at +1.9, while purchase costs increased from +1.9 to +2.3.
• Final Products Prices slipped from +1.3 to +1.1, with retail prices falling from 1.7 to +1.4.

Despite the fall in final product prices, stable labor costs and rising purchase costs will likely draw the RBA’s attention.

Last week, the RBA noted that wage growth was pushing inflation higher. An upward trend in wage growth and softer inflation, albeit moderate, would improve household disposable income and support a pickup in household spending.

Other Australian economic indicators included building approvals, which slipped by 0.1% in Mach versus a forecasted 3.0 increase. In February, building approvals jumped by 3.9%.

AUD/USD Reaction to the Australian NAB Business Confidence Survey

Before the business confidence numbers, the AUD/USD rose to a high of $0.67552 before falling to a pre-stat low of $0.67399.

However, in response to the business confidence figures, the AUD/USD rose from $0.67452 to a post-report high of $0.67543.

This morning, the AUD/USD was down 0.02% to $0.67485.

Later Today

This afternoon, there are no US economic indicators for investors to consider. A lack of stats will leave Fed chatter and market risk sentiment to influence.

Fed Chair Powell delivered monetary policy uncertainty last week. Forward guidance will move the dial this week, with the US CPI Report to tip the monetary policy divergence scales mid-week.

Beyond the economic calendar, the banking sector, the US debt ceiling, and corporate earnings also need consideration.