Business conditions continue to fall: NAB survey
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The news: Business conditions edged lower in June, continuing the long running trend since peaking in late 2022, according to NAB's monthly business survey.
The numbers: Business conditions fell 2 index points to 4, and is now well below the long-run average. A reading above zero reflects improving business conditions and a reading below zero shows a decline.
The fall was driven by declines in employment, down 6 points to 0, and profitability indices, down 1 point to 2, while trading conditions were broadly flat at 10 points.
However, business confidence rose 6 points to 4 — its highest level since early 2023 — driven by an increase in seven out of eight industries. The increase was led by manufacturing while wholesale and retail remained weakest as the only two industries in negative territory at -7 points.
Forward orders were flat at -6 points while capital expenditure fell 5 points to 0. Capacity utilisation edged up and remains well above average at 83.5%.
Labour cost growth eased to 1.8% in quarterly equivalent terms, from 2.3% in May, and purchase cost growth also eased to 1.3% from 1.7%. Product price growth fell to 0.7% overall from 1.1%. Retail price growth was broadly stable at 1.5%, while recreation and personal services prices fell to 0.7% from 1.1%.
The context: NAB noted that conditions declined in wholesale, construction, manufacturing and finance, business and property in the month, with the non-mining goods sectors now "clearly softer" than the services sectors.
While the activity side of the survey has shown a consistent easing, capacity utilisation remains high. This aligns with the slowing in activity seen more broadly but also with a high level of demand, relative to supply in the economy.
Price and cost growth variables generally remain elevated, NAB said, while both labour and purchase cost growth largely reversed last month’s increase, and output price growth also slowed.
What they said: “Business conditions continued their now long running easing trend in June,” said Gareth Spence, NAB's head of Australian economics.
“They are now below average, reflecting the slowing in the economy through late 2023 and early 2024.
“... Overall, our take on the survey is that it continues to signal another soft quarter in Q2.
"But also that capacity utilisation is still high with demand and supply yet to fully normalise. Price pressures continue to ease in a trend sense though the data certainly remains bumpy.”
The source: NAB Monthly Business Survey
