Business sentiment declines in Australia and the United States

Business sentiment has weakened in both Australia and the United States, according to recent economic indices.

In Australia, the NAB Business Conditions Index fell from 4 to -1 in August, marking the first time the measure has entered negative territory in six years and reaching its lowest level since August 2020. This decline was driven largely by a significant squeeze on profitability, which dropped 10 points to -9. The downturn was fueled by purchase costs growing at 2.3% quarter-on-quarter while product prices only grew by 0.8%. While employment remained relatively resilient, conditions deteriorated across most surveyed industries and states.

In the United States, the NFIB Small Business Optimism Index declined to 98.7 in August, falling below the consensus forecast of 99.3 and down from July’s reading of 99.8. Although the index remains slightly above its long-term historical average of 98.0, the decline was steeper than economists had anticipated. The index tracks various components including hiring expectations, capital spending, and sales forecasts, serving as a gauge for small business sentiment regarding inflation, labor markets, and the regulatory environment.