Business confidence rose by 10 points to -14 index points in May, while business conditions were unchanged at 3 index points. Capacity utilisation declined to 81.9 per cent, falling below 82 per cent for the first time in a year, NAB said in a press release.
Australia’s business confidence improved in May 2026, rising 10 points to -14, while business conditions held steady at 3, according to NAB.
Cost and price pressures eased, capacity utilisation fell to 81.9 per cent, and economic activity softened.
Despite stronger forward orders and capital spending, confidence remained weak, with businesses facing ongoing margin pressures.
Forward orders increased by 5 points and capital expenditure rose by 6 points. Purchase cost growth eased to 2.6 per cent in quarterly equivalent terms, labour cost growth moderated to 1.5 per cent, product price growth slowed to 0.9 per cent, and retail price growth eased to 1.5 per cent.
NAB head of Australian Economics Gareth Spence said the survey indicated economic activity had softened, although the impact of the Middle East cost shock had been less severe than initially feared.
“The shock has clearly been significant, but so far it does not look like the disruption to supply chains has been as bad as we had feared,” added Spence.
He noted that business conditions had eased since early 2026 but remained positive and stronger than confidence levels had suggested previously. According to Spence, spending growth has slowed but continues to hold up, reflecting broader economic resilience.
“Confidence has lifted off a very low base, but it is 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.
Spence added that the Reserve Bank of Australia would continue to monitor weakening business confidence and its potential impact on investment and hiring decisions as economic conditions and capacity utilisation trend lower.
NAB Group executive business and private Andrew Auerbach said businesses continue to face challenging conditions but are adapting effectively.
“We have had more than half a million conversations with our customers since late February and what they are telling us is conditions are tough and cost pressures are real. But so is the resilience of Australian businesses, and we can see them actively adapting and pivoting,” Auerbach said.
Fibre2Fashion News Desk (SG)
