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Business Conditions in Australia Turn Negative for First Time in Six Years in August, NAB Says

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Business conditions in Australia fell 5 points to negative 1 in August, the lowest level since August 2020, as slowing activity and persistent cost pressures weighed on businesses, National Australia Bank (ASX:NAB) said in a Tuesday report.

Business confidence fell 2 points to negative 8 index points, 12 points below its January level.

Business conditions declined in all states except New South Wales and Tasmania, with Victoria and Western Australia recording the largest monthly falls at 13 points each.

Trading conditions fell 5 points to 4 index points, while profitability fell 10 points to negative 9 index points. Employment eased by one point to 3 index points and remained more stable than the other components of business conditions.

Forward orders rose 3 points to 0 index points, while capacity utilization fell 0.6 percentage points to about 83%, partially unwinding its July increase. Cost and price growth measures remained broadly unchanged in the month and remain elevated compared to their long-run averages.

"Cost growth has been running well ahead of product price growth for almost six months," NAB Head of Australian Economics Gareth Spence said.

"Purchase cost growth remained elevated at 2.3% in quarterly terms, while product price growth eased to 0.8%. That widening gap is putting pressure on margins, with profitability falling 10 points in August to a new post-COVID low."

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