• Business confidence rose in July, led by services and construction.
• Conditions eased slightly but held June’s gains, with services outperforming goods sectors.
• Price pressures intensified, with rising input and output costs and high capacity utilisation.
• Economic momentum lifted in Q2, though cost challenges persist for businesses.

The July edition of the NAB Monthly Business Survey points to an improvement in economic momentum through Q2, but also highlights that cost and price challenges remain for the business sector.

Business confidence rose 2pts in July building on the gains last month and is now slightly above average. In trend terms, confidence is at its highest level since H2 2022 and is strongest in construction, as well as the service sectors. Outside of mining it remains weakest in wholesale and retail industries.

“Encouragingly, this month’s survey results suggest last month’s gains were not a one off,” said NAB Chief Economist Sally Auld.

“Confidence is now just above its long run average of +5 index points, it and has shown a consistent improvement in trend terms over the last three months, despite elevated global uncertainty”.

Business conditions retraced 2pts to + 5 index points in July. All three subcomponents eased, trading conditions fell 3pts to 11pts, profitability declined 2pts and employment eased 3pts.

“Business conditions eased 2pts in July but has held onto a fair proportion of the gains in the June survey,” she said.

By industry, a rise in conditions in retail, construction and wholesale was offset by declines across the other industries, led by a fall in transport & utilities.  In trend terms, conditions were strongest in mining and the services sectors, but remained weak in retail, wholesale and manufacturing.

“While conditions have strengthened, the picture across industries is still mixed. Generally, the services sectors, both consumer facing and for businesses, are stronger while retail and wholesale remain weaker,” she said.

Capacity utilisation fell to 82.4% but remains above its long run average of 81.3%. Capex eased 3pts to +7 index points, while forward orders were unchanged at 0 index points.

Price indicators pointed to pockets of ongoing inflationary pressures. On the inputs side, labour costs growth rose to 2.1% in quarterly equivalent terms, while purchase costs growth edged up to 1.5%. Final product price growth also strengthened to 0.9%, while retail price growth accelerated from 0.5% to 1.1%.

“Overall, the survey points to an improvement in activity through Q2 and suggests that the worries globally have not materially influenced local hiring and investment decisions. Though retail and wholesale conditions still remain weak in our survey, the improving activity picture has also shown up in consumer spending indicators. If the better consumer spending story sustains, this may suggest the scope for improvement in retail and wholesale conditions in coming months,” she said.

“The survey is consistent with improving economic growth, although still highlights the challenges around cost pressures faced by many businesses.”

For more detail on business confidence and conditions, visit the NAB Monthly Business Survey – June 2025.