Business conditions slump to COVID-era lows, NAB finds
The result was driven by weak consumer spending and declines in trading and profitability indicators, economists have said.
Business conditions slumped to their lowest level since COVID-19 lockdowns last month while a sharp fall in confidence erased October’s gains, according to NAB.
Business conditions declined 5 points to 2 points and confidence had an 8-point decline back into negative territory at -2 points, the bank’s monthly business survey showed.
Chief economist Alan Oster said the declines in conditions and confidence in November were felt across the economy.
“Confidence fell sharply in November and is now back below average,” he said.
It comes after business confidence rose 7 points to 5 points in October, the highest level since early 2023, with improvements across most industries.
“While we were optimistic last month, it appears the trend of well below-average confidence remains intact,” Oster said.
NAB’s survey recorded “solid” declines in confidence across most industries, except for construction (up 7 points) and mining (up 3 points).
Confidence remained weakest in retail (-10 points) and wholesale (-4 points).
All industries except mining and construction also experienced an easing in business conditions.
Trading conditions led the decline, falling 8 points, though other indicators such as profitability (down 6 points) and employment (down 1 point) also eased.
All subcomponents were now at or below average.
In trend terms, conditions remained weakest in retail and manufacturing and for businesses based in South Australia and Victoria.
“Conditions in the goods sector remain weak,” Oster said.
“Interestingly conditions in the services sectors – recreation and personal services and finance, business and property services continue to track at a higher rate.”
Oster added that “the forward-looking indicators in the survey remain weak”, with forward orders slipping 2 points to -5 points.
“Capacity utilisation continues to gradually trend lower, but was unchanged and above average in November. Capacity utilisation remains an important dynamic with the growth in activity continuing to look weak but the level of activity remaining high,” he said.
AMP economist My Bui said lacklustre consumer spending in the past two years was causing a “persistent downward trend” in business conditions, with the index now sitting at the lowest level since COVID-19 lockdowns in 2020.
The decline in confidence also suggested “overall sentiment is still fragile” among firms.
“While we have seen some improvement in consumer sentiment in recent months, business surveys tend to lag slightly and today’s data show that economic growth is still quite weak in Australia,” Bui said.
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