Business confidence turns positive despite declining conditions: NAB
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The news: Business confidence improved in May even as business conditions hit their lowest rating since 2020, according to NAB’s monthly business survey.
The numbers: Business confidence lifted to +2 points in May from -2 the previous month, but in trend terms it is still below the long-run average.
Meanwhile, business conditions fell from +2 index points in April to 0 points in May, driven by a 3 point fall in employment conditions to a new cyclical low of 0. Profitability remained at -4 points and trading fell to +5 points from +6.
Conditions fell for most industries, with sharper declines in retail and manufacturing but gains in mining as well as transport and utilities. In trend terms, business conditions have fallen from +6 points in September 2024 to +2 points.
Capacity utilisation rose to 82.3% after dropping to 81.4% last in April. Forward orders rose by 1 point to -2 index points while capex rose to +6 points after a 6 point fall to +1 in April.
Purchase cost growth fell from 1.7% to 1.1%, labour cost growth rose from 1.5% to 1.7%, product price growth fell from 0.8% to 0.5%, and retail price growth remained steady at 1.2%.
The context: NAB said the survey results highlight that business conditions remain weak amid ongoing pressures on profitability and soft demand, with signs of a further softening in labour demand.
The bank also flagged that retail conditions and confidence both declined over 2025 after a small recovery in late 2024, aligning with lower than expected household consumption growth this year.
What they said: “Overall, business conditions remain weak. If this continues in coming months, it will be difficult for confidence to rise from current levels. We will watch whether there is a more sustained softening in labour demand, with the employment index easing to below average levels,” said NAB chief economist Sally Auld.
The source: NAB Monthly Business Survey
