Overview

Business confidence improved further in July and is now just above its long run average. Confidence remains highest in both consumer and business service sectors as well as construction, with retail and wholesale remaining the most pessimistic. Though business conditions edged down in the month, they held onto most of the large gains in June. That said, there is a notable divergence across industries, with goods distribution and production industries, including retail, wholesale and manufacturing, generally weak. The services sectors – both consumer and business related – continue to show the most resilience. While the activity side of the survey has improved over the past two months, price pressures remain, with both input costs and output prices growth accelerating in the month with capacity utilisation also tracking above its long run average despite easing in the month. Overall, the survey, like the consumer spending indicators, points to an improvement in economic momentum through Q2, but also highlights that cost and price challenges remain for the business sector.

Comments from NAB Chief Economist, Sally Auld

Business confidence rose 2pts in July building on the gains last month and is now slightly above average. In trend terms, confidence is at its highest level since H2 2022 and is strongest in construction, as well as the service sectors. Outside of mining it remains weakest in wholesale and retail industries.

“Encouragingly, this month’s survey results suggest last month’s gains were not a one off,” said NAB Chief Economist Sally Auld. “Confidence is now just above its long run average of +5 index points, it and has shown a consistent improvement in trend terms over the last three months, despite elevated global uncertainty”.

Business conditions retraced 2pts to + 5 index points in July. All three subcomponents eased, trading conditions fell 3pts to 11pts, profitability declined 2pts and employment eased 3pts.
“Business conditions eased 2pts in July but has held onto a fair proportion of the gains in the June survey.” By industry, a rise in conditions in retail, construction and wholesale was offset by declines across the other industries, led by a fall in transport & utilities. In trend terms, conditions were strongest in mining and the services sectors, but remained weak in retail, wholesale and manufacturing.

“While conditions have strengthened, the picture across industries is still mixed. Generally, the services sectors, both consumer facing and for businesses, are stronger while retail and wholesale remain weaker”
Capacity utilisation fell to 82.4% but remains above its long run average of 81.3%. Capex eased 3pts to +7 index points, while forward orders were unchanged at 0 index points.

Price indicators pointed to pockets of ongoing inflationary pressures. On the inputs side, labour costs growth rose to 2.1% in quarterly equivalent terms, while purchase costs growth edged up to 1.5%. Final product price growth also strengthened to 0.9%, while retail price growth accelerated from 0.5% to 1.1%.

“Overall, the survey points to an improvement in activity through Q2 and suggests that the worries globally have not materially influenced local hiring and investment decisions. Though retail and wholesale conditions still remain weak in our survey, the improving activity picture has also shown up in consumer spending indicators. If the better consumer spending story sustains, this may suggest scope for improvement in retail and wholesale conditions in coming months.”
“The survey is consistent with improving economic growth, although still highlights the challenges around cost pressures faced by many businesses.”

For more information, see the NAB Monthly Business Survey (July 2025)