SYDNEY, Jan 28 Reuters A measure of Australian business activity rebounded in December as Christmas demand helped the downbeaten retail sector, a survey showed on Tuesday, though confidence remained poor as firms faced rising costs.

The survey from National Australia Bank NAB showed its index of business conditions rose 3 points to 6 in December, retracing some of November39;s 5point drop. The volatile confidence index edged up to 2, from 3.

Sales picked up by 3 points to 9, while profitability rebounded by 4 points to 4. The employment index added 1 point to 4. Conditions improved in all industries except transport and utilities, construction and wholesale.

Conditions remain strongest in services sectors, said Alan Oster, chief economist at NAB. Most industries recorded an improvement in business conditions, with retail reentering positive territory for the first time since November 2023.

Consumer demand was weak for most of last year as high mortgage rates and cost of living pressures squeezed spending power.

The Reserve Bank of Australia RBA kept interest rates at 4.35 for the entire year, though markets are speculating it could ease policy as early as February given a slowdown in inflation.

The NAB survey showed purchase costs edged up in December, but labour costs slowed to a quarterly pace of 1.4 despite a still strong labour market.

The easing in labour cost growth at the same time employment conditions improve suggests that wage pressures continue to…