NAB’s latest Business Survey has shown a fragile improvement in sentiment even as profitability and costs remain tight.
National Australia Bank’s (NAB) latest Monthly Business Survey has revealed that confidence is rebounding from extremely weak levels and that activity is holding slightly positive.
The May survey recorded a 10‑point jump in business confidence, taking the index to -14 points – still pessimistic but notably better than April’s deep trough.
NAB attributed majority of the lift to a turnaround in mining, wholesale, and transport & utilities, which had posted some of the softest readings a month earlier.
Yet it said that confidence remained in negative territory across every major industry.
By contrast, business conditions – NAB’s measure of what is happening on the ground – were unchanged at +3 index points in May.
At an industry level, conditions improved in wholesale, finance, property and business services, and recreation & personal services, while on a trend basis, mining and finance/property/business services are now the strongest performers, while manufacturing is lagging.
Conditions nudged higher in NSW and South Australia and rose sharply in Tasmania, yet in trend terms, Victoria remains the only state with conditions in negative territory.
Cost growth eases, but profit squeeze endures
After several months in which costs have outpaced prices by a wide margin, the May results have revealed a slight moderation in cost growth.
NAB reported purchase costs running at the equivalent of 2.6 per cent per quarter, lower than earlier spikes but still strong enough to keep pressure on input‑heavy sectors.
On the pricing side, the step‑down is even more pronounced, with final product prices increasing 0.9 per cent in quarterly terms and retail prices rising 1.5 per cent, roughly half the pace recorded in the previous month.
NAB says economy cooling, not crashing
NAB head of Australian economics, Gareth Spence, said the May survey showed that the economy was responding to higher interest rates and global shocks in a surprisingly orderly manner.
“The shock has clearly been significant, but so far it doesn’t look like the disruption to supply chains has been as bad as we had feared,” Spence said.
“Conditions have eased since early 2026 but remain positive, and they are not as weak as confidence suggested a month ago.
“That supports the view that economic growth has slowed since late 2025 but is still moving. We see the same signs in our transactions data, where spending growth has slowed but not fallen away.”
Looking ahead, he said that an uptick in confidence did not mean businesses were completely out of the woods.
“Confidence has lifted off a very low base, but it’s still weak and margin pressures are likely to remain a factor for businesses in the months ahead, even with some easing in costs growth this month,” he said.
“Overall, for the RBA, an economy that was overheating appears to have cooled somewhat, with conditions and capacity utilisation trending lower this year as rates have risen.”
‘Conditions are tough’, but firms adapting
NAB group executive for business and private banking, Andrew Auerbach, said direct conversations with clients were revealing how pressures were playing out day-to-day.
“We’ve had more than half a million conversations with our customers since late February and what they’re telling us is conditions are tough and cost pressures are real,” he said.
“But so is the resilience of Australian businesses, and we can see them actively adapting and pivoting.”
[Related: Inflation outlook ‘concerning’, warns RBA board member]
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