Business conditions weaken further, with forward indicators pointing to ongoing challenges
Business confidence in Australia dropped sharply in November, falling eight points to -3 index points, according to the latest National Australia Bank (NAB) Monthly Business Survey.
The decline reverses gains seen in October and underscores continued challenges in key sectors. The drop in confidence was broad-based across industries, with retail and wholesale recording the weakest performance.
“Confidence fell sharply in November and is now back below average,” said NAB chief economist Alan Oster (pictured above). “While we were optimistic last month, it appears the trend of well below-average confidence remains intact.”
The NAB survey also showed an easing on business conditions, with declines across all industries except mining and construction. In trend terms, conditions were weakest in retail and manufacturing. At the state level, South Australia and Victoria showed the weakest conditions in trend terms.
“Conditions in the goods sector remain weak,” Oster said. “Interestingly, conditions in the services sectors – recreation and personal services, as well as finance, business and property services – continue to track at a higher rate.”
Forward orders fell by two points to -5 index points in November, with mining, retail, and wholesale industries recording the weakest performance in trend terms. The forward-looking indicators in the survey remain weak, Oster noted.
Capacity utilisation held steady at 82.4%, remaining above its long-run average of 81.3%. Capital expenditure (capex) edged higher to +10 index points, also above its long-term average.
“Capacity utilisation continues to gradually trend lower, but was unchanged and above average in November,” Oster said. “It remains an important dynamic, with growth in activity looking weak, but the level of activity staying high.”
Input cost pressures were largely unchanged last month. Labour cost growth remained at 1.4% in quarterly equivalent terms, while purchase cost growth rose slightly by 0.2 percentage points to 1.1%.
Output price growth was steady at 0.6% in quarterly equivalent terms. Retail price growth dropped to 0.6%, while recreation and personal services output price growth dipped to 0.7%.
“Output prices in the survey have stabilised at a benign level over recent months, but the key consumer-facing sectors – retail and recreation and personal services – have been a little volatile,” Oster said.
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