The pipeline of work in the business sector is drying up and has worrying implications for Australia’s economic growth.
Businesses have reported a major pullback in forward orders, NAB’s business survey has revealed, which can signal a turnaround in economic activity.
The forward-looking measure of upcoming work fell six points to negative-five index points.
NAB chief economist Alan Oster said forward orders had fallen into the minuses three times previously – during the COVID-19 pandemic, the Global Financial Crisis and the early 1990s recession.
“So this is a big signal that things are slowing,” Mr Oster said.
He said forward orders had historically been the best measure of economic activity in the future and suggested conditions would keep slipping.
The overall business conditions index revealed a steep decline in May, falling seven points to eight index points.
Mr Oster said the conditions index was still tracking slightly above its long-run average but it had fallen sharply over the month.
The economist said the modest uptick in price and cost growth was slightly worrying despite trending down form their peaks, suggesting inflation pressures remained a “bit sticky”.
“With the easing in business conditions accelerating and forward orders falling sharply, there is a growing risk that the Reserve Bank of Australia’s attempts to maintain an even keel ‘run aground’,” Mr Oster said.
A separate survey on consumers run by Westpac and Melbourne Institute revealed a recovery in the index from 79 in May to 79.2 in June.
The index has been stuck at “recession lows” for the past 12 months as cost of living pressures and interest rate rises weigh on the minds of consumers.
– AAP
