Australian business activity dropped sharply in May

Australia’s economy saw a sharp slowdown in business activity in May, despite the recent interest rate cuts. According to National Australia Bank (NAB), the business conditions index dropped to zero, falling well below the long-term average of +6.

NAB Chief Economist Sally Auld highlighted persistent weakness in the retail sector, with consumer spending remaining sluggish. Retailers, squeezed by rising labor and supply costs, are reporting significantly weaker performance compared to other sectors.

The situation is further complicated by companies downsizing their workforce amid challenging economic conditions. Yet the labor market has so far remained resilient, keeping the unemployment rate steady at 4.1%. However, experts warn of potential long-term softening in labor demand.

As Reuters notes, the latest figures have boosted expectations of additional central bank stimulus measures as early as July.