NAB survey data shows Australian business confidence at -15 and conditions at -2, with rising input costs and falling forward orders creating a difficult environment for the RBA.
Business confidence fell to -15 in October and forward orders plunged 11 points to -12, signalling weaker growth ahead, which argues for a softer AUD. However, purchase cost growth accelerating to 2.4% with capacity utilisation at 82.1% above average keeps inflation pressures alive, so the RBA faces a difficult balance rather than a clear rate-cut path, which limits confidence in a bearish move.
Confidence at -15, conditions at -2 and forward orders at -12 point to weakening domestic demand and profits, especially in retail (-18 trend conditions) and manufacturing (-11). But persistent cost pressures complicate RBA policy, and a weaker activity picture could raise expectations of policy support, offsetting the negative growth signal.
Weak activity, falling confidence and plunging forward orders would normally argue for lower yields, but accelerating purchase cost growth at 2.4% quarterly-equivalent, shrinking margins and capacity utilisation of 82.1% above average suggest inflation may persist, complicating any RBA easing. The two forces largely offset each other.
Australia's NAB Business Confidence fell to -15 in October, while Business Conditions slipped to -2. A sharp 11-point drop in forward orders to -12 signals weakening economic momentum, even as capacity utilisation remains elevated at 82.1%.
Falling confidence and forward orders point to slower economic activity, which typically weighs on the currency, though persistent cost pressures could keep the RBA cautious about cutting rates, softening the effect.
Weaker demand and squeezed margins are a headwind for consumer-facing companies, but strong mining and utilities sectors and possible policy easing expectations offset some of the negative signal.
It is mixed: the growth slowdown points to lower yields, but stubborn cost pressures and above-average capacity utilisation suggest inflation risk that could keep yields elevated.