The impact was anticipated, but still the 9-point fall in business confidence in June because of the advent of Covid delta variant infections in Sydney in particular was a big warning of worse to come if case numbers keep the current lockdown in place for longer than forecast.
The National Australia Bank’s monthly survey of business conditions and confidence was forecast to see a hit taken in the latter because of the growing number of Covid cases in June, especially in Sydney.
The NAB said the loss of confidence was “particularly evident in NSW and Queensland.” The NAB however also pointed out that “confidence was generally softer elsewhere” in the month.
“Business conditions also weakened in June, thanks to the infections in Victoria which gradually eased,” the NAB said.
Business conditions also saw a sharp fall in the month, driven by a weaker read for Victoria, the survey revealed.
“This likely reflects the impact of the lockdown that started in late May which was eased in a series of steps over June. Conditions generally remain elevated across the states despite the broad-based weakening in the month,” the NAB pointed out.
Despite these weaknesses, the bank’s economics team was pretty upbeat, commenting “Overall, the survey points to a solid outcome in the June quarter for economic activity – and continues to reflect the support of both fiscal and monetary policy.”
“Confidence took a hit in the month with the survey undertaken in the week of the NSW lockdown and with some overlap to brief shutdowns in the smaller capitals.
“The threat of closing borders also appears to have weighed everywhere” NAB chief economist, Alan Oster wrote in commentary with the report.
“Forward looking indicators were softer in the month with both forward orders and capacity utilisation pulling back– but remaining high.”
“The business survey over the June quarter points to another solid outcome for activity, as the recovery transitions into a period of new growth. While growth will likely print at a slower pace from here, we continue to expect solid outcomes this year – and any lingering impacts of the lockdowns are more likely to impact the Q3 data” said Mr Oster.
