Uncertainty cooling business confidence: NAB survey

Business confidence is recovering but remains weak amid a sea of uncertainty, NAB’s latest survey shows.

Australian businesses are still best by uncertainty brought on by the COVID-19 pandemic. Photo Jeremy Piper

Australian business uncertainty remains high despite a further broadbased improvement in NAB’s monthly business survey as coronavirus restrictions ease.

Business confidence recovered to a net balance of -20 points in May from -45 points in April.

Business conditions recovered to -24 points from -34 points in April.

The employment sub-component of business conditions lagged, with a recovery to -31 points from -34 points.

Forward indicators including capital expenditure, capacity utilisation also remained weak, NAB warned.

Despite a broadbased improvement, NAB chief economist Alan Oster said business conditions “remain deeply negative” – at a level last seen coming out of the GFC – with the services sector weakest.

Similarly, business confidence “remains weak” with a current reading last seen around the trough in the 1990s recession.

“Overall, this month’s results accord with what we have seen elsewhere, with restrictions having generally been eased – though to varying degrees across the states – there has seen some pick-up in activity,” he said.

“However, uncertainty remains high both globally and domestically and businesses likely remain concerned about how quickly they will return to full capacity.”

Unsurprisingly the employment index “point to ongoing restraint in the business sector with respect to hiring and expansion plans”.

“Indeed, while capacity utilisation saw some improvement, it remains historically low, and well below pre-COVID-19 levels,” Mr Oster added.

“Forward orders, also near record lows, suggest activity will remain weak in the near term.”