Feb 11 2021
On Tuesday, NAB released its latest monthly business survey for January 2021, which highlights how business confidence and conditions have fared over the month. The business confidence index is an indicator of overall business conditions, represented by the current financial position and economic outlook of businesses. When the index is at zero, the number of optimistic and pessimistic responses are equal. The index is positive when more businesses are optimistic and negative when more are pessimistic. According to NAB’s monthly business survey, business confidence rose by 5 points during January, to reach 10 index points. This represents the fourth month in a row that business confidence has been positive. As the Australian economy continues its recovery from the recession caused by the COVID-19 pandemic, businesses are feeling more optimistic, which is keeping the business confidence index in positive territory. The relaxation of COVID-19 restrictions during 2021 has helped to further boost businesses’ confidence in the new year.
Looking deeper into business confidence, the transport, utilities and wholesale sectors reported higher than average confidence in January, with the construction sector being as confident as the economy average. Conversely, the recreation and personal services, manufacturing, finance, property, mining and retail sectors were all less confident than the economy average. However, confidence in the Arts & Recreation and Personal Services Divisions is rising, driven by the ongoing relaxation of COVID-19 restrictions on business operations.
Victoria recorded the highest level of confidence in January, with Western Australia and New South Wales also reporting confidence levels at or above the Australia-wide average. Queensland reported the largest rise in confidence (17 index points). Tasmania was the only state to report negative business confidence, but confidence is rising in the state.
Conversely, the business conditions index, which is represented by the trading conditions, profitability and employment indexes, fell by nine index points in January after reaching a multi-year high in December. All of the major components of the business conditions index fell in January. Of these, businesses reported that trading conditions were 11 index points worse off than in December, while firms also reported a decline in profitability and employment conditions. The wholesale, mining and manufacturing sectors led the decline in business conditions during the month. Overall, conditions remain strongest in retail and weakest in construction.