Summary: Business conditions up; business confidence improve for third consecutive month; capacity usage continues recovery but still at low level; second Victorian lockdown to put “brakes on the recovery”.
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, declining to below-average levels by the end of 2018. Forecasts of a slowdown in the domestic economy began to emerge in the first half of 2019 and NAB’s business confidence index continued 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 June, business conditions improved for a second consecutive month. NAB’s conditions index registered -7, up from May’s reading of -24.
“Nonetheless, while the rebound has been significant, conditions remain deeply negative and well below average, reflecting the fact that activity still has some way to go before a full recovery can be declared,” said NAB chief economist Alan Oster.
Business confidence moved higher for a third consecutive month. NAB’s confidence index rose from May’s reading of -20 to +1. Typically, NAB’s confidence index leads the conditions index by approximately one month, although some divergences appear from time to time.
The figures came out on the same day as ABS Weekly payroll figures and Commonwealth bond yields moved a little higher at the long end, ignoring lower US Treasury bond yields in overnight trading. By the end of the day, the 3-year ACGB yield remained steady at 0.31% while the 10-year yield had ticked up 1bp to 0.93% and the 20-year yield had gained 2bps to 1.56%.
In the cash futures market, expectations of a change in the actual cash rate remained fairly stable. By the end of the day, contracts implied the cash rate would remain in a range of 0.13% to 0.145% through to the latter part of 2021.