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Business confidence has hit an all-time low and most businesses expect the economic impacts of the coronavirus to worsen over the coming months, according to a major bank.
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Business confidence at its ‘weakest level’
15 April 2020
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NAB has released its Monthly Business Survey for March 2020 which saw its largest recorded declines in business confidence and conditions due to COVID-19 and the subsequent containment measures.
The report showed that business confidence dropped by 64 index points in the sharpest monthly fall ever recorded by the survey since it began in 1989.
Business conditions also recorded its largest monthly decline of 21 index points, driven by falls in trading conditions, profitability and employment.
NAB Group chief economist Alan Oster said it was not surprising that the outlooks of businesses were so weak, given falls in activity and cash flow.
“While almost everyone expects a fairly rapid bound-back in activity once the spread of the coronavirus is contained and social distancing rules are relaxed, the immediate worry for the business sector is the impact on cash flows,” Mr Oster said.
“Without cash-flow support, it is likely many businesses will be severely impacted and unable to return to operations once the economy begins to recover. This has been an important focus of policymakers.”
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Mr Oster said NAB expects a “recession of unprecedented speed and magnitude” over the next three quarters, which will also see a sharp increase in unemployment.
“Policymakers have made a huge response that we think will be unable to offset the negative prints we will see in economic data in the near term, but we are optimistic these actions will support a solid recovery once the virus is contained,” he said.
“For now, more businesses expect it to get worse before it gets better.
“It could well be that conditions fall to the lowest level since the 1990s recession in the coming months. But we will be closely watching the survey for a turn in business confidence, which may take some time to recover following an economic shock of this magnitude.”
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