Australia's biz conditions decline in May 2023: NAB survey

13 Jun '23

2 min read

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Insights

Australia's business conditions and confidence significantly fell in May 2023, as per a National Australia Bank survey.
The decline spanned trading, profitability, and employment.
Forward orders, especially in retail and wholesale, also plunged sharply, indicating potential demand slowdown.
Yet, capacity utilisation remained high, despite the slowdown.

Australia's business conditions experienced a notable reduction in May 2023, primarily across the trading, profitability, and employment sectors, as indicated by a recent survey by the National Australia Bank (NAB). As the slowdown seems to be accelerating, conditions, albeit slightly above their long-run average, remain significantly below levels recorded in early 2023.

Business confidence dropped to minus 4 index points in May, marking a consistent trend of stagnation or decline since February, with most industries now venturing into negative territory. A significant dip in forward orders was indicative of a probable severe slowdown in demand. This was particularly noticeable in the consumer sector, where both retail and wholesale forward orders fell steeply, making them the weakest among all industries.

Despite the evident slowing activity, capacity utilisation remained high, well above pre-pandemic levels, and showed little signs of retracting. This trend echoed on the cost side, where both input and output price growth continued to mark high rates, as per the NAB Monthly Business Survey.

Business conditions fell 7 points to 8 index points in May, attributed to declines across all three sub-components. Trading fell 8pts to 14 index points, employment declined 7 points to 4 index points, and profitability fell 5 points to 7 index points. Despite the conditions having eased considerably since January, they still remain slightly above the long-term average.

Business confidence took a downturn by 4 points to minus 4 index points. This drop was broadly-based across industries, barring manufacturing and transport and utilities which saw modest improvements.

Forward orders saw a decrease by 6 points to minus 5 index points, while capacity utilisation edged lower but remained high at 84.7 per cent. Reported capital expenditure (capex) also eased by 2 points to 6 index points.

Despite the challenging landscape, both input and output price growth registered an uptick and remain high. Labour costs growth rose to 2.2 per cent in quarterly equivalent terms, while input prices rose to 2.5 per cent. Final products price growth rose to 1.3 per cent, partially reversing the easing seen last month. However, in a positive sign, retail price growth continued to moderate, now tracking at 1.3 per cent.

Fibre2Fashion News Desk (DP)

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