Red line – Business Confidence, Black line – Business Conditions. Source: NAB Business Survey February 2021.
  • Business conditions rebounded from lower recording in January
  • Business confidence is the highest since 2010
  • Capacity utilisation and capex expected to improve over the coming months

According to NAB‘s monthly business survey, business conditions rose in February, rebounding back to 15 index points – matching its December reading which was the highest level recorded since August 2018.

This is a welcome result considering that business conditions slipped in the month prior. But now trading (up from 12 to 21 index points), profitability (up from 12 to 17 index points), and employment conditions (up from 3 to 8 index points) all recorded strong improvements.

When breaking the data down by state, WA and NSW led with the largest gains, offsetting the falls in TAS and SA. Business confidence rose across all states, WA again taking the lead while TAS remaining the lowest (see graphs below).

Business conditions by state (net bal., trend). Source: NAB Business Survey February 2021.
Business confidence by state (net bal., trend). Source: NAB Business Survey February 2021.

WA being a clear outperformer makes sense considering business is essentially back to normal, with very few domestic COVID-19 restrictions.

“Businesses are again expanding their workforce, which is key for supporting the labour market recovery,” commented Alan Oster, NAB Chief Economist.

Business confidence by industry continued to climb, reaching its highest level since early 2010.

“This says the economic recovery has very strong momentum and even though government support is tapering, businesses are increasingly confident the economy will continue to improve,” said Mr Oster.

Mining recorded the highest rise in confidence, followed by personal & recreation, and manufacturing recording respectable increases in the range of 18 to 22 index points.

The only industry that recorded a decline was retail, which fell 4 index points.

Business conditions by industry were once again led by wholesale, which was up 29 index points. Overall, all industries reported conditions in positive territory.

Capacity utilisation edged up in the month and is now above its long-run average and its pre-COVID level. Forward orders rose too and are clearly above average.

“Encouragingly, capacity utilisation is back at its highest level since mid-to-late 2019 at 81.8%. If capacity utilisation remains elevated, we should hope to see further rises in the survey’s investment and employment indicators over the coming months.”

Alan Oster, Chief Economist of NAB

Capital expenditure (capex) rose to 8 index points, its highest level since August 2019.

“This is a remarkable turnaround from its trough of -32 index points in April 2020. Incredibly, most industries are reporting above-average capex, led by retail,” said Mr Oster.


For more information, the NAB Monthly Business Survey February 2021 report is available online.

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