Business confidence improves in January, conditions worsen: NAB survey

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 Business confidence improves in January, conditions worsen: NAB survey

Summary

  • Business confidence picked up in January even as business conditions declined from record highs in December. 
  • While the National Australia Bank’s business confidence index doubled to 10 points in January, its measure of conditions dropped to 7 from a very strong 16 in December.
  • While retail and wholesale businesses remained robust, recreation and personal services continued to lag, according to the monthly business survey by National Australia Bank.

Business confidence picked up in January even as business conditions declined from record highs in December, according to a survey. The fall in business conditions was on account of the COVID-19-related breakouts in a few cities, which were ultimately contained. 

While the National Australia Bank’s business confidence index doubled to 10 points in January, its measure of conditions dropped to 7 from a very strong 16 in December. The conditions’ index recorded a contraction of 34 last April at the height of the coronavirus pandemic and remained just above its long-run average of 6.

The index of sales halved to 11 in January, while profitability dipped 4 points to 9 and employment eased 7 points to 3.

Image Source: NAB Monthly Business Survey, 9 February 2021

Recreation, personal services lagged

Even though profitability and employment dipped, both were above their historical averages. While retail and wholesale businesses remained robust, recreation and personal services continued to lag, according to the monthly business survey by National Australia Bank.

Image Source: NAB Monthly Business Survey, 9 February 2021

Commenting on the data, NAB Group Chief Economist Alan Oster said since overall businesses was still expanding their workforce, employment conditions remained in positive territory. The decline in jobless rate to 6.6 per cent in December from the peak of 7.5 per cent last July, shows that the labour market has recovered faster than expected.

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Capacity utilisation improves 

The capacity utilisation and capex saw modest gains. According to the survey, capacity utilisation climbed to 81 per cent in January to be around its pre-coronavirus levels. The capacity utilisation is expected to see further surge going ahead as demand picks up, Oster said.

The survey’s index of investment firmed to 1 in January, up from the contraction of 32 index points in April last year. This is its first month above zero since the coronavirus pandemic started.

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