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National Australia Bank’s (NAB) Monthly Business Survey for October found forward orders plunged 11 points to -12 index points, with the decline broad-based across industries.
Business confidence also edged down one point to -15 index points, while business conditions fell one point to -2, leaving both measures below their respective long-run averages.
NAB Head of Australian Economics Gareth Spence said the sharp fall in forward orders pointed to the risk of further deterioration in trading conditions over the coming months.
“Forward orders reflect the pipeline, and a fall of this size points to the risk that trading conditions could soften further over the coming months, particularly given the broad-based declines across industry in the month,” Spence said.
“Overall business conditions certainly have softened this year, but we could now see some further cooling as we end 2026.”
Broker Daily has discussed the impact of slumping forward orders on its weekly podcast, Finance Specialist.
Retail and construction face further pressure
Spence said the survey highlighted retail and construction as two industries to watch, with retail continuing to report the weakest activity indicators.
Trend business conditions in retail fell to -18 index points, while confidence dropped to -19. Forward orders also remained among the weakest across the industries surveyed.
“The softer consumer backdrop remains evident in retail. It reports the weakest confidence, conditions and forward orders of any industry, and its capacity utilisation is the furthest below average. Retail price growth also slowed sharply, down 0.8ppts to 0.2 per cent, reflecting the slowing in goods retailing we have seen in other data,” he said.
Construction, meanwhile, recorded a sharp decline in forward orders, despite having the highest capacity utilisation of any industry.
“While capacity utilisation is the highest of any industry in construction, the sharp fall in forward orders in the month and ongoing high input cost growth pose a risk that activity may begin to slow here as well, despite the strong underlying needs for both housing and infrastructure across the country.”
Consumer pessimism adds to business pressures
The latest consumer sentiment figures also point to a challenging environment for consumer-facing businesses, with Australian households increasingly pessimistic about the economic outlook.
The Westpac–Melbourne Institute Consumer Sentiment Index fell 2.7 per cent to 78.2 in November, its lowest reading in four years, amid renewed inflation and interest rate concerns.
The deterioration was particularly pronounced among mortgage holders, with sentiment across the group plunging 11.6 per cent to 68.1, a record low in data dating back to 1994.
Westpac said more than 70 per cent of consumers expected mortgage rates to increase further over the next 12 months, while expectations for house price growth also deteriorated sharply.
It said Christmas spending plans suggested households in mortgage-heavy areas were tightening their belts, while concerns about further interest rate increases and the cost of living continued to weigh on sentiment.
Profitability falls as employment rebounds
Across the broader survey, trading conditions fell four points to -1 index point, while profitability declined two points to -8. Both measures are now more than 10 points below their respective long-run averages.
The employment index, however, rebounded five points to +4 index points, taking it back above its long-run average.
Capacity utilisation eased for a third consecutive month, falling 0.1 percentage points to 82.1 per cent, although it remained above its long-run average.
On costs, purchase cost growth edged up 0.1 percentage points to 2.4 per cent at a quarterly rate, while labour cost growth eased 0.3 percentage points to 1.5 per cent.
Product price growth also edged down to 0.6 per cent, broadly in line with its long-run average.
NAB points to mixed business conditions
NAB Group Executive, Business and Private Banking, Andrew Auerbach said the survey reflected the varied conditions the bank was seeing across its business customer base.
“There’s no single story for Australian business right now. Some are performing well and looking for their next opportunity, while others are feeling the pressure, particularly those exposed to softer consumer spending. Even in a tougher environment, we’re still seeing businesses willing to invest when the right opportunities emerge,” Auerbach said.
“Our bankers are out there every day talking to customers, and we’ll keep pounding the pavement, listening to businesses and understanding what’s happening on the ground.
“For customers facing challenges, we’re here to help. We always encourage businesses to talk to us as early as possible so we can work through the options available together.”
A challenging outlook, but lending opportunities remain
Businesses have been contending with a range of regulatory and economic pressures in recent months.
Alongside economic pressures, Australian Taxation Office debt enforcement and regulatory changes such as Payday Super have also added to pressure on business cash flow.
A new study from ScotPac found that tax and compliance costs were the biggest drain on SME cash flow, cited by 20 per cent of businesses, closely followed by rising input and supply costs (19 per cent).
Despite this, business lending has remained robust across the board.
According to credit reporting bureau Equifax, business loan demand increased across all five sectors it tracks, while mortgage demand fell 19.2 per cent year on year in September.
Banks such as Commonwealth Bank of Australia, Australia New Zealand Banking Group, NAB, and Judo Bank have also recorded strong growth in their business lending books, alongside non-bank lenders such as Banjo Loans.
This growth has also intensified competition among lenders. The Australian Banking Association recently found that the margin on small business loans above the cash rate had fallen to a five-year low.
[Related: Businesses are struggling, but demand for finance keeps rising]
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