Rising global energy prices could make it harder for central banks to bring inflation under control and increase the risk that interest rates stay higher for longer, according to NAB Chief Economist Dr Sally Auld.
10 March 2026 | 3 min read
10 March 2026
Summary
Business confidence unwound gains over the past two months, falling 4pts (unrounded) in February. Business confidence is now in negative territory for the first time in almost a year, likely reflecting some caution in the wake of the February rate hike.
Business conditions were flat in the month as a 1pt rise in trading conditions was offset by a 2pt fall in employment. The profitability sub-component was unchanged in February. Since the recent peak in business conditions in September, the services industries have softened slightly, while others such as manufacturing, wholesale and retail, have improved.
With business conditions stable, capacity utilisation has remained elevated (with 6 out of 8 industries above average) despite showing some signs of easing over recent months.
The rebound in cost and price growth in the month highlights that despite the volatility in activity and price measures in the survey, some underlying inflation pressure remains.
Looking forward, the improvement in forward orders over recent months suggests that activity will likely remain robust in the near term. In some potentially good news for the supply side of the economy, the Capex measure jumped 3pts in February, rising to a three year high.
Details
- Business confidence fell 4pts (unrounded) to -1 index points. Confidence has fallen into negative territory for the first time in 11 months after having reached a multi-year high in September 2025.
- Business conditions remained at +7 index points (around the long-run average). Trading conditions rose 1pt, offset by a 2pt fall in employment. The profitability sub-component was unchanged.
- By industry, conditions were mixed with 4 industries rising while 4 industries fell. In trend terms, conditions remain in positive territory for all industries except manufacturing. Trend confidence remains positive in all industries except retail and transport and utilities.
- By State, conditions fell across all regions except NSW and Tasmania. Trend conditions are broadly in line across regions except in NSW and Vic which lag marginally and in Tas which is notably outperforming.
- Capacity utilisation was flat at 82.8%, remaining 1.5ppts above its long-run average. Forward orders rose 4pts in February and reached their highest level since late 2022, consistent with strong activity in recent economic data from the end of 2025. Capex rose 3pts, reaching its highest level in three years.
- Purchase cost growth rose to 1.5% in quarterly equivalent terms, retracing recent slowing. Labour costs rose to 1.5%. Product price growth remained flat at 0.5% while retail prices growth spiked to 1.0%, unwinding some slowing over the past four months.
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