Businesses’ faith in economic rebound builds: NAB

Businesses are increasingly confident the economic recovery is on track, as NAB’s sentiment survey lifts to over a decade high.

Conditions and confidence in the hospitality industry remains challenging. (Photo by Wayne Taylor/Getty Images)

Businesses are increasingly confident the economic recovery is on track and better times are ahead, as NAB’s sentiment survey lifted to over a decade high in February.

Companies were more optimistic across all states and industries, besides retail, while business conditions rebounded to their best since August 2018.

NAB chief economist Alan Oster described the latest insight as “a very positive survey result”.

“Business conditions and confidence are both at multi-year highs and, importantly, we’re starting to see an uptrend in business hiring and investment activity,” Mr Oster said.

“The survey continues to point to a robust recovery in the business sector, despite some tapering of government support beginning in late 2020.”

Importantly, the survey showed firms’ capacity utilisation was back at 82 per cent and at pre-COVID levels – a positive sign that, if maintained, employers will increasingly look to hire and invest in the months ahead.

The widely followed NAB survey showed the business confidence index lifted by 4 points to 16pts – the highest since early 2010. Reported conditions recovered following a January dip to 15 points, equalling its December level.

NAB said the most confident businesses were in the mining sector, while recreational and personal services firms and retailers were the least upbeat about and further uplift in activity.

Last week’s national accounts, which showed a powerful 3.1 per cent lift in real GDP over the December quarter, has provided a fillip to consumer confidence, ANZ’s weekly survey – also released this morning – revealed. Consumer sentiment, by ANZ’s measure, is back around the long-term average.

With COVID-19 vaccines being rolled out across the country, economists and policymakers are betting that the buoyant mood among households will drive a consumption-led lift in economic activity this year.

The next major hurdle is the end of JobKeeper at the end of this month, with CBA this morning predicting 110,000 jobs will be lost when the wage subsidy scheme expires.

“However, given the strength of the leading indicators of the labour market we expect that the overall impacts on the labour market will be short lived and any negative impact on spending will be minimal,” CBA economist Nicolas Guesnon said.

The hardest hit industries will likely be travel sensitive sectors like transport, accommodation and arts and recreation, Mr Guesnon said.

The Morrison government is expected to unveil targeted financial support measures for COVID-affected businesses beyond March in the coming days.