Business conditions and confidence rose last month as lockdowns came to an end in both NSW and Victoria, according to the latest monthly survey of business from the National Australia Bank.
And the NAB said the full impact of the re-openings in NSW and Victoria would be more evident in the November survey report in a month’s time.
“Overall, the results provide first indications of a strong rebound in activity as the major states emerge from lockdowns, with more improvement likely in November as Victorian restrictions continue to ease.
The impact of the re-openings in NSW and Victoria had differing impacts last month, according to the survey.
Each of the trading conditions, profitability and employment subcomponents contributed to the improvement in conditions, which was driven by gains in NSW.
Confidence also rose, building on the turnaround seen in September, driven by Victoria as businesses anticipated reopening at the end of the month (largely after the survey period).
Business conditions rose 6pts to +11 index points in October, which put them back above the long-run average.
All components of conditions rebounded, with trading conditions the strongest (up 7pts to +17 index points). NSW led the rebound in conditions, up 21pts, while Victoria, SA, and WA all eased.
“Conditions turned around in October, driven largely by the end of lockdown in NSW,” according to NAB Chief Economist Alan Oster.
“Conditions have held up fairly well through the lockdown period, but the resilience of businesses was beginning to wear thin in September so it is pleasing to see a quick rebound in NSW with restrictions mostly lifted.”
“Conditions improved in construction, recreation & personal services, and manufacturing, where restrictions have had a large impact,” said Mr Oster.
“There is still scope for things to improve further in coming months, particularly in Victoria, but overall this is an encouraging result with conditions back above their long-run average.”
Business confidence also rose 11pts to +21 index points, led by Victoria (up 18pts) followed by Queensland and SA, while confidence fell in Tasmania. Confidence improved noticeably in retail (up 22pts), finance, property & business (up 19pts), recreation & personal services (up 10pts), mining (up 8pts) and manufacturing (up 8pts).
The NAB said that retail, business, finance & property, and personal & recreation services all saw large rises in confidence in the month.
Capacity utilisation also rebounded to 81.5% and forward orders rose strongly – with both now back above average.
The survey again revealed a build-up in price pressures in the economy with the impact of elevated goods demand alongside supply chain disruptions and border restrictions pushing input cost inflation to the highest level in a decade.
On the output side, products prices continue to track at a high rate,” although retail price growth eased considerably.”
The bank forecast that these pressures could “persist over coming months before goods demand and the labour market normalise.”
While the demand-side is seeing a healthy rebound the supply side will likely recover more gradually, and amidst strong growth the ability of business to pass on costs will have notable implications for margins and inflationary pressure more generally, the bank warned.
