NAB business survey: Confidence falls ‘sharply’ as all components now at below average condition

Business confidence has taken a sharp downward turn, according to National Australia Bank after showing a surprising uplift last month.

The latest NAB business survey showed an eight point fall in confidence to minus three points while business conditions fell five points.

The goods production and distribution sectors – particularly manufacturing and retail – were weakest in trend terms, while the services sectors remain significantly stronger.

All three sub-components of business conditions are now at or below average, the bank said.

Across the states conditions are weakest in trend terms in SA and Vic, while the only state seeing an uptick in conditions was Queensland.

“Confidence fell sharply in November and is now back below average” said NAB Chief Economist Alan Oster.

“While we were optimistic last month, it appears the trend of well below-average confidence remains intact.”

Poor confidence was reflected in the decline for forward orders by the mining and retail sectors, which have been below the long run average for much of the year. However conditions in the service sectors, including recreation and personal services, finance, business and property services continue to outperform.

Capacity utilisation continues to be strong at 82.4 per cent, above the long-term average while capital expenditure is also up 10 points to be higher than the average.

In a positive sign for inflation, the bank saw a decline in retail prices of 0.6 per cent, while recreation and personal services prices fell 0.7 per cent. Overall output price growth was unchanged at 0.6 per cent on a quarterly basis.

“Overall, the survey points to ongoing soft growth in Q4 though with capacity utilisation unchanged at an above-average level it will likely take more time for price pressures to fully normalise,” Mr Oster said.

The confidence indicator comes as NAB’s Australian housing market update suggests that December could be the month that house prices begin to fall.

According to NAB and CoreLogic, four of the eight capitals recorded a fall in values led by Melbourne and followed by Darwin, Sydney and Canberra. Overall, house prices grew just 0.1 per cent in November, the 22nd straight month of growth but the lowest monthly rise since January 2023.

Pertha was the standout in terms of capital gains, with prices growing 1.1 per cent in the month to be 3 per cent higher for the quarter. The growth rate is half of the 6.7 per cent growth seen in Perth in the June quarter.

Brisbane great at 1.8 per cent for the quarter but showed the slowest growth since March 2023, while Adelaide grew 2.8 per cent over the same period for its slowest growth since June 2023.

Sydney saw housing values fall 0.8 per cent for the quarter, with high end properties dropping by twice that.

Melbourne prices continued to fall, dropping 0.4 per cent to now be down 5.5 per cent from the high set in March 2022.

Dawin eked out a meagre 0.2 per cent growth for the month but fell 0.7 per cent for the quarter, while Canberra remained flat. Hobart rose slightly but remains 1 per cent down for the year.

Regional housing has performed better, rising 1.1 per cent for the past three months.

Listings have risen across the country to be 16 per cent higher over the quarter across capital cities. Sydney and Melbourne listings are now at their highest level since 2018.

Home sales have also dropped to be 4.6 per cent lower, driven by a 15.4 per cent drop in Sydney over the year.

Rents continue to rise however, up 0.2 per cent for the month to be 5.3 per cent higher over the year. That is a slower rate of growth from the previous year when rental prices were growing at 8.1 per cent.

CoreLogic’s executive research director Tim Lawless said that the continued supply of listings plus a weaker economic environment suggested that house prices would continue to trend downwards.

“Housing markets are likely to be arriving in 2025 on relatively weaker footing, with value growth losing steam or falling, advertised stock levels rising, unaffordability at record highs and demand no longer keeping pace with the flow of new listings,” he said. “Until interest rates come down, it’s hard to see the weakening housing trend turning around.”

“A couple of rate cuts might be enough to shore up a declining trend in home values but it is hard to see any material upward pressure returning until interest rates reduce more substantially and affordability barriers are less formidable.”