Australia’s NAB business confidence index improved from -23 to -14 in May, recovering from very weak levels as concerns about the economic fallout from the conflict in the Middle East eased. However, confidence remained strongly negative, highlighting continued caution among businesses despite signs that the economy has avoided a sharper slowdown. Business conditions remained steady at 3, with gains in trade and employment offset by weaker profitability.
The survey indicated that activity remains resilient despite rising interest rates and the recent shock in energy prices. Trading conditions improved from 7 to 8, employment conditions increased from 1 to 2, while profitability decreased from 0 to -1. NAB said the disruption caused by the conflict in the Middle East was less severe than initially feared, particularly in relation to supply chains. According to NAB’s Gareth Spence, economic growth has slowed since late 2025 but is continuing to expand rather than contract, a view supported by spending and transaction data.
Inflation indicators also moved in a more positive direction. Purchasing cost growth slowed from 4.5% to 2.6% on a quarterly basis, labor cost growth declined from 1.7% to 1.5%, while product price growth and retail price growth halved. The moderation in cost and price pressures adds to the evidence that the RBA’s tightening cycle is cooling the economy. While weak confidence remains a concern about future investment and employment decisions, the survey suggests the economy is slowing rather than faltering.
| index | April | maybe |
|---|---|---|
| NAB Business Trust | -23 | -14 |
| Working conditions | 3 | 3 |
| Trading conditions | 7 | 8 |
| Profitability conditions | 0 | -1 |
| Conditions of employment | 1 | 2 |
| Purchasing cost growth | 4.5% | 2.6% |
| Labor cost growth | 1.7% | 1.5% |
| Product price growth | 1.8% | 0.9% |
| Retail price growth | 3.1% | 1.5% |
The full release of the NAB Australia Monthly Business Survey is here.
