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.
