Below trend growth to continue
Conditions and confidence hit by lockdowns in Q3.
The imposition of lockdowns saw business conditions and confidence fall sharply in Q3. Conditions fell sharply but managed to remain in positive territory (down 17pts to +13 index points) as businesses displayed resilience built up through past lockdown experiences and government support continued. Confidence, however, turned negative (down 19pts to -1 index point) with confidence down in all states and industries.
According to Alan Oster, NAB Group Chief Economist, “With lockdowns in place for most of Q3, it’s unsurprising to see both business conditions and confidence take a fairly large hit for the quarter. The biggest falls were in NSW and Victoria, with conditions in the personal & recreational services sector down a long way.”
“While conditions deteriorated sharply, they didn’t fall to the depths seen during the first lockdowns in 2020. That shows the resilience that the economy has built up by adapting to past lockdowns, as well as the residual strength from earlier in the year and the impact of government support,” said Mr Oster.
Forward orders fell (down 17pts to +5 index points) and short-term expectations for orders, investment, and employments over the next three months all deteriorated. Still, expectations for capital expenditure over the next 12 months remained above average, despite easing to 26 index points. Likewise, employment expectations for the next 12 months remained high at 30 index points.
“The hit to businesses in Q3 has carried through to expectations for the near-term, but firms are still optimistic of a stronger rebound in the longer term.” said Mr Oster. “Employment and capital investment expectations for the next 12 months are relatively healthy, so firms are looking forward to a stronger 2022.”
The survey was conducted from 17 August to 9 September, in advance of the announcement of reopening roadmaps in NSW and Victoria.
According to Mr Oster, “Since this survey was conducted, vaccination rates have risen dramatically and both NSW and Victoria are now beginning the process of reopening. That should see business conditions improve considerably over the coming months.”
“While these survey results confirm the large hit to activity that took place in Q3, we are optimistic for a strong rebound in activity in Q4 and into 2022 and reopening progresses,” said Mr Oster.
For more information, please see the: NAB Quarterly Business Survey (September 2021)
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