Worried about inflation? Here's what NAB says will happen next

NAB has just called out where it sees inflation heading to next…

| More on:
A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It's no secret that high inflation has, and remains, a significant concern for any ASX investors. For one, there are the corrosive effects on our wealth that inflation causes to worry about. But high inflation also means higher interest rates. These can negatively impact almost all asset classes, including ASX shares.

So almost no one relishes the prospect of sticky inflation and interest rates remaining high. That's with the possible exception of those with piles of cash in the bank.

Predicting what happens next with inflation and interest rates is a tricky game. After all, Australian inflation in today's globalised economy can be influenced by events as far away as Europe or the Middle East.

But let's see what analysts at National Australia Bank Ltd (ASX: NAB) are predicting.

NAB business survey points to falling inflation

NAB has just released its monthly business survey covering the month of September. And it paints a positive picture of inflation and where it may be heading next.

Kicking off, the survey found that labour cost growth fell to 2% over September. That's after a 4% spike in July. Purchase cost growth also "eased materially", although NAB acknowledged that both metrics "remain elevated".

Overall pricing growth also eased down to 1%, with 'recreation & personal services' price growth slipping to 0.8%. However, the report notes that retail price growth was unchanged at 1.8%.

In terms of business confidence, the survey highlighted that business conditions declined slightly, losing three points in NAB's index to a rating of 11 points. NAB does note that this reversed a small rise from August. It also pointed out that business trading conditions, profitability and employment all remain "above their historical average levels".

The survey did note that inflation remains elevated, stating that "the upcoming Q3 CPI release is still expected to show strong inflation for the quarter as a whole with energy, rents, and a range of services prices likely to contribute strongly".

However, NAB also argued that "the September survey results suggest the momentum of some of the key cost pressures driving inflation may have started to step back in a welcome sign for the broader inflation outlook".

Here's some of what NAB chief economist Alan Oster said on the survey's findings when it came to inflation:

Business confidence, like the conditions index, has been broadly steady for a number of months now…

The survey showed some positive signs for inflation with cost pressures and price growth easing in the month… Minimum wage impacts and movements in oil prices have caused some volatility in cost pressures recently but the September survey results suggest the easing trend seen earlier in the year may continue.

If NAB is on the money here, it could be good news for ASX investors, and most Australians for that matter.

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Economy

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
Share Market News

ASX shares could get a massive boost on Tuesday. Here's why

Australia's inflation is running hotter than other comparable economies, and experts are divided on how fast relief could be coming.

Read more »

Woman and man calculating a dividend yield.
Share Market News

3 things ASX investors should watch this week

The next few days will be massive for your stock portfolio. Keep your eyes on these events especially.

Read more »

A cool young man walking in a laneway holding a takeaway coffee in one hand and his phone in the other reacts with surprise as he reads the latest news on his mobile phone
Share Market News

ASX 200 rallies on latest Aussie inflation figures

ASX 200 investors are optimistic following the October CPI data just released by the ABS.

Read more »

A man in a business suit peers through binoculars as two businesswomen stand beside him looking straight ahead at the camera.
Share Market News

3 things ASX investors should watch this week

Expect a huge few days for your stock portfolio. These are the critical developments to monitor.

Read more »

A hipster-looking man with bushy beard and multiple arm tattoos sits on the floor against a sofa reading a tablet with his hand on his chin as though he is deep in thought.

RBA rate shock: What's next for ASX shares?

Will ASX shares suffer if rates keep on rising?

Read more »

people looking through comical glasses, what to look for, reporting season, person thinking, person interested
Share Market News

3 things ASX investors should watch this week

Here are the most important events to keep an eye on this week for the sake of your stock portfolio.

Read more »

a line up of job interview candidates sit in chairs against a wall clutching CVs on paper in an office setting.
Share Market News

ASX 200 investors take the latest Aussie jobs data in stride

The Australian Bureau of Statistics released the latest unemployment figures this morning.

Read more »

Green stock market graph with a rising arrow symbolising a rising share price.
Share Market News

Why is the ASX 200 having such a cracking day on Wednesday?

The ASX 200 is flying higher today.

Read more »