Business conditions in Australia have fallen to their lowest point in three years, according to a monthly private survey.
The National Australia Bank Business Survey, released today, showed business conditions fell four index points to -4 in May.
NAB said business conditions had been hit by resurgent concerns about stability in the euro zone, lagging forward orders and employment conditions.
"The degree of weakening in activity over the past couple of months suggests that the economy is struggling, with conditions in some of the previously strong industries, namely mining and finance/business/property also looking somewhat laggard at present," it said.
"Activity in these industries has largely been influenced by worsening external factors, including resurgent fears about the future of the euro, which is having a real impact on financial markets and actively slowing global demand.
"Forward indicators of demand provide no signs of improvement, with particularly low levels of capacity utilisation not boding well for activity in coming months."
Mining, retail and construction suffered particularly strong declines - with the former suffering the impact of falling commodity prices and industrial disruption.
Conditions in transport and utilities, wholesale and manufacturing posted some improvements in May, but earlier falls mean these are still trending downwards.
Business confidence posted a sharp fall in May, down six points to -2, as companies looked to both worrying external factors and the federal budget, delivered early in the month.
"Intensifying worries about the stability of the euro zone culminating into a spate of financial and commodity market disturbance during May have clearly worried business," NAB said.
"The survey has confirmed that the commonwealth's budget package provided little joy for businesses, with only a handful of respondents (less than four per cent) expecting their business to benefit."
The NAB noted that a Reserve Bank of Australia (RBA) rate cut in May - which set the cash rate at 3.75 per cent - had not appeared to boost confidence.
JP Morgan economist Tom Kennedy noted that employment appeared to suffer during the month, with mining work experiencing a steep fall.
"Employment conditions in mining plunged from 42 to 10," he said.
"This is likely a reaction to the recent declines in commodity prices, slowing demand from major trading partners and various supply side disruptions which continue to have a lingering effect on business activity.
"Declines were also experienced in the structurally challenged retail sector with the index plunging 22 points."
