The latest monthly business survey from National Australia Bank has revealed a significant decline in business confidence during August.
Business confidence slipped into negative territory during the month while business conditions also fell but remain positive for now.
NAB economists attributed the decline in business conditions primarily to a drop in employment.
The survey’s employment 'subcomponent' suggests 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," said NAB.
However, capacity utilisation remained high during the month and capital expenditure (capex) rose.
Price pressures in the economy presented a mixed picture. While labour cost growth eased, purchase cost growth saw a slight uptick. Retail price growth remained high, outpacing broader output price inflation.
Last week’s release of June quarter GDP figures showed the slowest annual growth since the recession of the 1990s.
NAB economists highlighted that the sluggish private sector growth reflected in the GDP figures may now be extending into the new financial year, with early signs pointing to a softening labour market.
The August survey — while showing resilience in certain areas such as capex and capacity utilisation — paints a cautious picture of the Australian business landscape as companies navigate mounting pressures in the face of persistent inflation and subdued economic growth.