Business confidence at one year peak in trend terms: NAB
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The news: Business confidence improved for the third consecutive month in June to reach its highest level in more than a year, in trend terms, as business conditions rose for the first time this year.
The numbers: Business confidence rose by three points to +5 index points in June, just below the long-run average. Confidence in trend terms was weakest in the retail and wholesale sectors and was the strongest in construction.
Business conditions meanwhile increased by eight points to +9 index points as trading conditions and profitability improved. In trend terms however it only rose by two points to +4 index points, which is still below the long-run average.
Conditions improved in most sectors, with manufacturing and retail posting the largest gains after big falls in May, but conditions remained the weakest in those two sectors in trend terms. Conditions in the wholesale and transport sectors were largely unchanged.
Capacity utilisation increased to 83.3%, up from 82.3% in May and 81.4% in April. Utilisation is now on par with the January 2025 level in trend terms and above the long run average.
Forward orders lifted by two points to sit at zero index points, the highest result since September 2023 even though it is below the long run average of +1 index point. Capex rose by four to +10 index points.
Purchase cost growth rose to 1.5% from 1.2%, in quarterly equivalent terms. Also in quarterly equivalent terms, labour cost growth fell to 1.5% from 1.4%, product price growth increased to 0.6% from 0.5%, and retail price growth fell to 0.6% from 1%.
The context: NAB said the survey results suggest that business conditions are stabilising but flagged that the rise in capacity utilisation suggests demand and supply imbalances remain an issue.
NAB also noted that differences between cost growth and price growth are indicative of potential profitability pressures. However, it flagged that the magnitude of cost indicator changes “signalled little underlying change”.
What they said: “Overall, the survey is encouraging that sluggish momentum in early 2025 will improve into the second half, with a notable increase in conditions in the month,” NAB head of Australian economics Gareth Spence said.
“An improvement in confidence is also welcome given the raft of negative headlines globally over recent months," Spence said.
“While there were large moves in the month, and we know that the monthly survey can be volatile, the hope is at least some of these trends will be sustained over coming months.”
The source: NAB Monthly Business Survey
