Business more confident at start of 2021

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)


Business confidence bounced back in January, and while conditions eased in the month the signs are employers are still hiring.

The National Australia Bank released its monthly business survey on Tuesday with its leading indicators continuing to point to an ongoing economic recovery.

Business confidence rose to well above its long-run average, recovering from a fall late last year, but conditions pulled back from their multi-year highs seen in December.

“Business started the year on a more optimistic note, even as conditions eased,” NAB chief economist Alan Oster said.

“Importantly, employment conditions remain in positive territory, so overall businesses are still expanding their workforce.”

Confidence rose five index points in January, to an above average 10 points, while business conditions fell to seven index points from 16.

Components of the conditions index all eased but remained in positive territory, with trading notably halving to 11 index points.

Business investment finally emerged into positive territory after trending higher from a slump last April when the COVID-19 pandemic set in.

Mr Oster said last year’s turnaround in business conditions is starting to feed into better employment and capital expenditure (capex) activity.

“But we’re still a while a way from very strong employment and capex activity needed to offset the contraction last year,” he said.

A separate survey showed consumer confidence consolidating just below its long-run average.

The ANZ-Roy Morgan consumer confidence index – a pointer to future household spending – eased 0.6 per cent in the past week after a 0.8 per cent rise previously.

ANZ head of Australian economics David Plank says confidence probably needs some meaningful news or developments to break away from here.

“The vaccine rollout in Australia could be the next big trigger, with a successful program possibly propelling sentiment much higher,” Mr Plank said.

“Of course, difficulties in providing vaccine coverage could have the opposite effect.”


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