Summary: Business confidence bounce in April after March’s plunge; business conditions dropped heavily again; capacity usage drops; capex spending down in an attempt to conserve cash.
NAB’s business survey indicated Australian business conditions were robust in the first half of 2018, with a cyclical-peak reached in April of that year. Readings from NAB’s conditions index then began to slip and, by the end of 2018, they had dropped to below-average levels. Forecasts of a slowdown in the domestic economy began to emerge in the first half of 2019 and NAB’s business confidence index began trending lower, with the conditions index following. In March 2020, vastly lower readings began to reflect coronavirus containment measures.
According to NAB’s latest monthly business survey of 400 firms conducted in the last week of April, business conditions extended on March’s drastic fall. NAB’s conditions index registered -34, down from March’s revised reading of -22.
NAB chief economist Alan Oster said, “Business conditions weakened further in April and are now well below the levels seen in the GFC”. Westpac senior economist Andrew Hanlan noted the conditions index reading “is approaching the early 1990s recession low, -38.8.”
However, business confidence rebounded, albeit back to a still-recessionary level. NAB’s confidence index rose from March’s revised reading of -65 to -46. Typically, NAB’s confidence index leads the conditions index by approximately one month, although some divergences appear from time to time. NAB’s Oster said the improvement “was broad based” while remaining “deeply negative across all industries and states.”
US Treasury bond yields increased by moderate amounts in overnight trading but local Treasury yields largely ignored the increases and had a quiet day. By the end of it, 3-year and 10-year ACGB yields both remained unchanged at 0.23% and 0.95% respectively while the 20-year yield finished 2bps higher at 1.61%.