Summary

Business conditions dropped back below average in August after a brief uptick in July, and confidence sank into negative territory in the month. The fall in conditions was driven by a drop in the employment subcomponent, suggesting that weaker trading conditions and profitability may now be more materially feeding into labour demand. The fall in confidence was also marked, while forward orders remained around the negative level that has persisted for some time. Still, capacity utilisation remains elevated and capex rose in the month. In terms of price pressures on the input side, labour cost growth eased but purchase cost growth ticked higher. Retail price growth remains high and continues to outpace broader output price inflation. With the recent National Accounts showing very soft private sector growth in Q2, the business survey suggests this has carried on into the new financial year and may be beginning to translate into a softer labour market.

Survey Details

• Business confidence fell 5pts to -4 index points, with significant falls in recreation & personal services, transport & utilities, construction and manufacturing. In trend terms, the level of confidence remains weakest in retail and wholesale.
• Business conditions fell 3pts to +3 index points. The fall was driven by the employment subcomponent, down 6pts, though there were also small falls in trading conditions and profitability.
• By industry, conditions fell in wholesale (down 18pts), manufacturing (down 9pts), retail (down 6pts) transport & utilities (down 5pts), and finance, business & property (down 2pts). Mining rose sharply while construction and recreation & personal services were up 1pt each. In trend terms, conditions remain weakest in retail at -6 index points.
• By State, conditions fell in NSW (down 5pts) and Vic (down 3pts) as well as SA, and there was a large negative correction in Tas (albeit based on a small sample size). Qld was flat and WA rose 1pt. In trend terms, conditions remained strongest in Qld, with WA and NSW also in positive territory.
• Forward orders were unchanged at -4 index points. Capex rose 5pts to +11 index points, while capacity utilisation rose to 82.9% and remains well above average, albeit down on June’s level.
• Labour cost growth eased to 1.7% in quarterly equivalent terms, down from 2.4% in July, while
  purchase cost growth rose to 1.6%.
• Product price growth was 0.6% (from 0.7%). Retail price growth rose to 1.2% (from 1.0%), while recreation & personal services price growth eased to 0.8% (from 1.2%).

For more information, please see the NAB Monthly Business Survey August 2024