The NAB Economics Monthly Business Survey for May reveals a decline in business conditions, with employment conditions weakening and trading and profitability remaining below long-term averages. According to NAB Chief Economist Sally Auld, "Our trend business conditions measure has fallen steadily since late 2024 despite the pick-up in activity over the past two quarters." She noted that weak profitability is a key factor, remaining in negative territory.
Business confidence showed improvement, reducing the gap between business conditions and confidence. However, confidence remains weakest in retail and wholesale sectors. All other industries, except finance, business, and property services, recorded positive business confidence in May. Dr. Auld stated, "By industry, the persistent weakness in retail business conditions and confidence aligns with the softer than expected pick-up in consumption over Q1."
Capacity utilisation increased to 82.3%, while capital expenditure also rose to +6 index points. Forward orders remained soft at -2 index points compared to the long-run average of +1 index points.
Price indicators presented mixed results: labour costs grew robustly at 1.7% on a quarterly equivalent basis; purchase costs growth eased to 1.1%, as did final product price growth at 0.5%. Retail price growth stayed at 1.2%, indicating ongoing profitability pressures.
Dr. Auld remarked on the overall state of business conditions: "Overall, business conditions remain weak. If this continues in coming months, it will be difficult for confidence to rise from current levels." She added that there will be close monitoring of any sustained softening in labour demand as the employment index has eased to below-average levels.
Further details can be found in the NAB Monthly Business Survey for May 2025.