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Business conditions edge below average levels: NAB

10 July 2024
business conditions edge down to below average levels nab

Slowing activity has seen business conditions fall further in June despite a sharp rise in business confidence, the latest NAB data reveals.

Business conditions continued to fall in June, continuing their long-running trend since peaking in late 2022, according to the latest NAB Monthly Business Survey.

The major bank said the conditions declined in wholesale, construction, manufacturing and finance, business and property in the month, with the non-mining goods sector now clearly softer than the services sector.

Business conditions fell 2 points to +4 index points and are now below the long-run average.


The fall was driven by declines in employment (down 6 points to 0 index points) and profitability indices (also down 1 point to +2 index points), while trading conditions were broadly flat at +10 index points.

NAB head of Australian economics Gareth Spence said business conditions continued their long-running trend in June and are now below average.

Spence said this reflected the slowing in the economy through late 2023 and early 2024.

“Of note is the sharp decline in the employment index in the month,” said Spence.

“While it’s only one month’s read, the employment index is now below its long-run average and may be signalling that the broader slowing in the economy is flowing through more strongly to labour demand.”

Business confidence, however, rose 6 points to +4 index points driven by an increase in seven out of eight industries.

The increase in the month was led by increases in manufacturing and wholesale, while the remaining industries increased except for construction which declined 3 points.

The wholesale and retail sectors remained the weakest and were the only two industries in negative territory at -7 index points.

“Business confidence rose relatively sharply in the month and is now back into positive territory and at its highest level since early 2023,” said Spence.

Forward orders remained in negative territory at -6 index points, while capex fell 5 points to 0 index points.

“The key driver of weak forward orders over recent months have been the retail and wholesale sectors, though manufacturing weakened further in the month and is also now very weak,” said Spence.

Capacity utilisation edged up and remains well above average at 83.5 per cent.

Labour cost growth and purchase cost growth both eased, with labour cost growth dropping to 1.8 per cent in quarterly equivalent terms and purchase cost growth falling to 1.3 per cent.

Product price growth fell to 0.7 per cent overall (from 1.1 per cent). Retail price growth was broadly stable at 1.5 per cent, while recreation and personal services prices fell to 0.7 per cent (from 1.1 per cent).

“Encouragingly, the key price and cost growth measures reversed their increase from last month,” said Spence.

“That said, retail price growth was broadly stable and is high despite the weaker activity outlook and confidence in the industry.”


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