Australian business activity picks up in December, NAB survey shows

SYDNEY, Jan 27 (Reuters) – A measure of Australian business conditions picked up in December as sales and profits improved, a survey showed on Tuesday, while limited spare capacity at firms suggested the economy could be bumping up against its speed limit.

The survey from National Australia Bank showed its index of business conditions rose 2 points to +9 in December, having fallen 3 points the previous month. The survey’s volatile measure of business confidence edged up 1 point to +3.

A measure of sales gained 3 points to a historically strong +16, adding to other signs of a revival in consumer demand late last year. The index of profits added 3 points to +7, while employment held steady at +4.

Measures of prices ticked higher in the three months to December, while capacity utilisation eased only a touch to a still elevated 83.2%.

The Reserve Bank of Australia holds its first policy meeting of the year next week and speculation is intense it could decide to raise the 3.6% cash rate to try and control stubborn inflationary pressures.

“The survey is consistent with the view that momentum improved in the Australian economy in the fourth quarter of the year,” said NAB Chief Economist Sally Auld. “Elevated capacity utilisation in the economy is broad based.”

Cyclically sensitive industries including retail and manufacturing showed gains in both business conditions and employment, while trend activity was strongest in the services sectors, NAB said.

(Reporting by Wayne Cole; Editing by Himani Sarkar)