Australian business maintains decline in June – NAB

Australia’s business conditions continued to decline in June, maintaining a trend that began in late 2022, according to the National Australia Bank (NAB). NAB’s survey indicated that its business conditions index dropped by 2 points to +4, falling beneath its long-term average.

The drop was driven by decreases in wholesale, construction, manufacturing, and finance, with non-mining goods sectors softer than services. Retail remains the weakest sector, being the only industry in negative territory in trend terms.

Despite the downturn, business confidence rose sharply, reaching its highest level since early 2023, driven by increases across seven out of eight industries. Capacity utilisation remained high at 83.5 per cent, indicating strong demand relative to supply.

Gareth Spence, NAB’s Head of Australian Economics, noted that business conditions are now clearly below the long-run average, reflecting a broader economic slowdown.

Employment and profitability indices fell, while trading conditions remained flat. Spence highlighted the significant drop in the employment index, which may signal a more substantial impact of the economic slowdown on labour demand.

Other indicators showed mixed results, with forward orders flat and capital expenditure falling. Encouragingly, both labour and purchase cost growth eased, and overall product price growth slowed, though retail prices remained stable and high.

The survey suggests another soft quarter for Q2, but high capacity utilisation indicates that demand and supply have yet to fully normalise, with price pressures continuing to ease overall.

Attribution: The National Australia Bank (NAB).