Australian May business conditions fall to weakest level since September 2014

Australia’s business conditions for the month of May slumped to its weakest level since they briefly fell to almost zero in September 2014, although the confidence was up quite strongly during the period.

Business conditions fell to 0.6 in May. The sub-indices were mixed: profits, capacity use, and trading fell, while employment, exports, labour costs and purchases costs rose modestly. At 2, the employment index is consistent with modest jobs growth, while capacity use points to a sharply higher unemployment rate.

Conditions fell in New South Wales and Victoria to well below average levels, though the three-month moving averages are still around or close to average. Conditions also fell a touch in South Australia, though are still strong; and they remain above average in Tasmania – though well off recent highs. Conditions continued to deteriorate in Western Australia.

The change in conditions across industries was mixed. Mining fell, but remains elevated. Retail conditions deteriorated very sharply, to the weakest monthly level since March 2001. Transport was down by some margin, while the finance and recreational sectors fell a smaller amount. Manufacturing, construction and wholesale all rose somewhat.