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Businesses recovering after Omicron wave, but warning signs show inflation
Business conditions are strengthening as the Omicron wave eases. NAB’s business survey in February shows business confidence improving and regaining momentum but there are warning signs of inflation, with strong growth in the employment index and the price of goods and services to businesses appearing to be on the rise. Chief Economist for NAB Alan Oster predicts that further improvements in the employment market will result in it being “somewhere south of four per cent very soon and around three and a half for unemployment by the middle of the year". While businesses face increases in fuel, wages and input costs, Mr Oster says the benefit for them is that more people will have a job and families will still buy. Big increases in purchase costs have been seen in manufacturing, construction and wholesale, but not in personal recreation services. The forecast for the first interest rate move by the Reserve Bank has been brought forward to August. He says “broadly, we could expect to see, by the middle of the year, inflation around 3.7 per cent”, and that combination with unemployment at 3.5 per cent, could see the Reserve Bank reconsidering cash rates.
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