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Business conditions throughout May have eased again, continuing the steady fall from late 2024 to early 2025.
Business conditions continue steady decline in May: NAB
13 June 2025
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7 minute read
NAB's Monthly Business Survey for May has reflected a further decline in business conditions to 0 index points, with the gap between business confidence and conditions continuing to narrow.
Based on the survey results, conditions have declined steadily from late 2024 to early 2025 and have eased from around average at +6 index points in September 2024 to +2 index points currently.
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Sally Auld, NAB chief economist, said by subcomponent, employment conditions weakened while trading and profitability both remained well below long-run average levels.
“Our trend business conditions measure has fallen steadily since late 2024 despite the pick-up in activity over the past two quarters. Weak profitability is a key driver, which remains in negative territory,” she said.
Auld noted that it would likely be hard for confidence to lift sustainably if conditions deteriorated further; however, business confidence improved in May, though trend confidence remained below the long-run average.
Confidence was noted to have remained the weakest in retail and wholesale, while all other industries, except finance, business and property services, recorded positive business confidence throughout May.
“By industry, the persistent weakness in retail business conditions and confidence aligns with the softer than expected pick-up in consumption over Q1. Our measures of profitability and trading conditions are notably weaker in retail than other industries,” Auld said.
Also revealed in the survey was a rise in capacity utilisation from 81.4 per cent to 82.3 per cent, partially reversing the large decline seen in April.
Capex was noted to have risen by +6 index points, profitability remained subdued at -4 index points, and the employment index fell 3pts in May – a new cyclical low.
Auld also said that price indicators were mixed, labour costs growth was robust, purchase costs growth and final product price growth eased, while retail price growth held steady at 1.2 per cent from April, which was a clear indicator of ongoing profitability pressures.
“Overall, business conditions remain weak. If this continues in the coming months, it will be difficult for confidence to rise from current levels. We will watch whether there is a more sustained softening in labour demand, with the employment index easing to below average levels.”
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