Business confidence rebounds: NAB

A faster-than-expected turnaround saw confidence turn positive in June, although conditions remained below average.

Sydney CBD. Business confidence has rebounded although conditions remain weak. Picture: David Swift

Business confidence turned positive in June, rebounding from record lows over the previous three months, according to the NAB monthly business survey.

But while confidence lifted into positive territory, business conditions remained negative and well below average, in what could be a sign that there is still some way to go.

NAB’s confidence index rose by 21 points to +1 points while the business conditions index rose 17 points to -7 points, its highest level since February.

“Like last month, the improvement in trading conditions and profitability lines up with our internal NAB data which suggest significant improvement in activity,” said NAB chief economist Alan Oster.

“However, it is important to remember that survey indicators in level terms are still very weak and business is nowhere near back to normal.”

The improvement in both confidence and conditions was driven by a lift in trading, profitability and employment over the period.

Mr Oster said the turnaround had occurred faster than expected, although the survey was conducted just prior to the reintroduction of lockdowns in Victoria.

“We will be closely watching next month’s survey to see how confidence and conditions are again impacted there and indeed more broadly, with developments in the state highlighting the risk to business Australia-wide,” Mr Oster said.

His comments come amid continuing economic uncertainty, as Victoria battles a second wave of the COVID-19 outbreak.

Victoria has been put on a new, six-week lockdown, a move some business leaders fear will smash confidence and cost jobs.

The services sector continued to show the weakest outcomes, as COVID-19 restrictions still in place around the country meant many businesses in the sector were yet to return to normal.

The construction and manufacturing sectors remained weak in terms of optimism, which Mr Oster said was concerning, and a sign that industries not directly impacted by the lockdowns were being hit.

The survey found that there were improvements in forward orders, capacity utilisation and capex, but all remained at very low levels.

“The increase in confidence is encouraging but forward orders will need to see further improvement if this is to be sustained,” Mr Oster said.

“Capacity utilisation remains very low and will need to recover further before we see businesses again move to expansion mode.”