Coronavirus wipes out business confidence

Business confidence plunged during February, with coronavirus expected to further drag on a weakened economy.

People wear face masks in front of the Sydney Harbour Bridge in Sydney, Monday, March 9, 2020. AAP, Steven Saphore

Business confidence and conditions fell during February, with the impact of coronavirus expected to further drag down a weakened Australian economy.

According to the latest NAB monthly business survey, confidence fell three points to minus four and business conditions fell 2 points to zero - both well below their long term averages.

Forward orders deteriorated significantly, falling three points to negative four.

But NAB chief economist Alan Oster noted that the indicators didn’t fall as much as anticipated.

“Both conditions and confidence fell in the month, but not by as much as we had feared,” he said.

“That said, both continue to track below average and with forward orders weakening its likely we could see further deterioration.”

But NAB's survey results were published after Prime Minister Scott Morrison set out principles for a stimulus package, the details of which are due to be released later this week.

Shortly after, US President Donald Trump revealed some details of the the stimulus measures being proposed for America. That announcement cheered local invstors, turning the ASX around from being 3.8 per cent down during the morning to be trading down 1.1 per cent just before lunch.

Mr Oster also noted 50 per cent of firms who responded to the survey have been unaffected or experienced minor impact from the virus, but further continuation of the virus will likely result in bleaker confidence and condition outlooks.

“We will closely watch the business survey for any impacts of the coronavirus,” he said.

“However, it is very possible this number will rise as the spread of the virus continues – this would most likely result in a further deterioration in confidence and eventually reported business conditions.”

NAB’s Ms Oster noted that softening conditions has been broadbased across an array of industries, with services and construction remaining the most favourable.

He said the retail section was an exception to further decline, but remained “soft”.

Tasmania had the better condition outlook compared to other states, according to the survey.

“The eastern mainland states remain clustered around 1-3 index points in trend terms with WA lagging,” Mr Oster said.

“Tasmania remains the standout – with conditions notably above the other states.”