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The latest NAB Monthly Business Survey, released this week, shows a sharp drop in profits and sales drove the unwinding in August.
The report pointed to the employment index, which remains unchanged at low levels, conforming to expectations of a “relatively jobless recovery”.
“The strong improvement in business conditions recorded in July was short-lived, unwinding significantly last month,” the report said.
“The business conditions index dropped four points in the month (following a five point increase in July) to four-plus index points,” it said.
“At this level, business conditions are still well up on 2013, but are significantly lower than the pre-GFC years and slightly below the long run average of the series (five-plus since 1997) – suggesting the moderate economic growth environment is set to continue.”
The decline in business conditions during the month reflects an unwinding of some of the narrow gains seen in July, the report said, highlighting the “particularly stark” manufacturing sector, which dropped 13 points following an 18-point improvement in July to equal second lowest of the industries along with mining.
“Business confidence eased back as well, but remains close to the improved levels seen since last year’s election,” the report said.
NAB has forecast that the unemployment rate will peak at 6.5 per cent by the end of the year and expects the official cash rate to remain steady until late 2015.