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Australia NAB business conditions fall into negative territory

The NAB survey pointed to worsening profitability as costs continued to outpace selling prices, pushing conditions below zero for the first time in six years.

Reported · Written up by our desk · EM Currencies

Australian business conditions deteriorated sharply in August, according to the NAB Business Conditions Index, which fell from 4 to -1. The 5-point drop marked the first time the measure has been negative in six years and left it at its lowest level since August 2020, Action Forex said.

The report also showed business confidence weakening from -6 to -8 as conditions fell across six of the eight industries surveyed and in every state except New South Wales and Tasmania. Profitability was the main drag, dropping from 1 to -9, a 10-point fall to a new post-COVID low, while trading conditions fell from 9 to 4.

NAB attributed the pressure to a widening cost and price squeeze, noting purchase-cost growth stayed elevated at 2.3% quarter over quarter even as product-price growth slowed to 0.8%. The gap between costs and prices has persisted for nearly six months, and NAB said it is increasingly feeding into weaker activity and business conditions.

Other components were mixed, with employment edging down only from 4 to 3, and forward orders improving from -3 to 0. Capacity utilization slipped from 83.1% to 82.5%, with NAB describing the overall picture as slowing activity and rising margin strain rather than an outright collapse in labor demand.

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