NAB business survey shows economic conditions continue to gain momentum

A quarterly business survey has found firms believe the nation’s recovery from the pandemic is still gaining momentum.

Latest research from one of the nation’s major banks has revealed businesses remain confident the economic recovery from COVID-19 is still improving.

NAB Economics’ first quarterly survey for 2021 has revealed strong revivals across several sectors, with firms suggesting conditions and confidence in the economy is still gaining momentum.

Both the business conditions and confidence indexes improved over the quarter to 17 points respectively.

NAB chief economist Alan Oster said the economy had reached an important milestone where capacity utilisation rates – the measure of a firm’s productivity – are suggesting the level of activity in the economy is trending upwards.

NAB group chief economist Alan Oster said the economy had reached an important milestone. Picture: Supplied

“It is worth remembering that conditions provide a guide as to how fast activity is growing, but capacity utilisation provides an indication of the level of activity,” Mr Oster said.

“In this quarter we hit an important milestone; not only does it appear that activity continues to grow at a good pace, but the capacity utilisation index now suggests that the level of activity is back around its pre-COVID level.”

Capacity utilisation rose two percentage points to 82.3 per cent in the first quarter, according to NAB.

Mr Oster there were variations between industries in regards to capacity rates, with some sectors such as mining still underperforming.

Changing spending patterns has helped some sectors more than others. Picture: NCA NewsWire / Dan Peled

“However, it is worth noting that there are still differences across industries – capacity utilisation in retail, which in aggregate has been boosted by the change in spending patterns, is well above its pre-COVID level, while some service industries, as well as mining, remain below,” he said.

All mainland states expect South Australia experienced improvements in conditions, with Western Australia being the standout performer.

The western state’s economic rebound is partly fuelled by strong export demand for commodities such as iron ore, which earlier in the week hit a record price of $US189 a tonne.

NAB’s survey found improvements in both confidence and conditions. Picture: NCA NewsWire / Dan Peled

Employment conditions also improved despite the tapering of the JobKeeper wage subsidy scheme.

Inflation pressures within the economy remain soft, according to the survey.

Mr Oster said leading indicters had improved, with three and 12-month predictions for business conditions, employment and expenditure set to increase.

“While a return to a pre-COVID level of activity would be an important milestone, it would not be a case of ‘mission accomplished’, as we would normally expect the economy to grow over time,” he said

“That is why a very welcome aspect of the survey is the strength across all the leading indicators, which suggests that the recovery should continue at a relatively strong pace.”

Originally published as NAB business survey shows economic conditions continue to gain momentum