Summary: Business conditions up; business confidence down after three months; confidence decline led by east coast states; capacity usage continues recovery but still at low level; economists “suggest recent gains may be reversed” especially in Victoria, NSW.
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 indices 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 the indices continued trending lower. In March 2020, vastly lower readings began to reflect coronavirus containment measures.
According to NAB’s latest monthly business survey of over 400 firms conducted in the last week of July, business conditions improved for a third consecutive month. NAB’s conditions index registered 0, up from June’s revised reading of -8.
Business confidence deteriorated after improving over the past three months. NAB’s confidence index fell from June’s revised reading of 0 to -14. Typically, NAB’s confidence index leads the conditions index by approximately one month, although some divergences appear from time to time.
“This survey was conducted prior to the escalation to stage 4 restrictions in Victoria. Prior to that, the survey suggested that business conditions saw a further improvement in July which was broad-based across states,” said NAB chief economist Alan Oster. He noted “a significant deterioration” in confidence “across all industries and in each state, except South Australia and Western Australia, with the most pronounced falls “in New South Wales and Victoria where concerns around the spread of the virus were escalating.”