Business confidence and business conditions January 2010-January 2021. Source: NAB Business Survey January 2021.
  • Business confidence is up while business conditions are down
  • NAB Chief Economist says business has started the year on a more optimistic note
  • The retail sector in particular is showing signs of a strong recovery

According to the NAB Monthly Business Survey for January 2021, business confidence rose to an above average +10 index points. In contrast, business conditions pulled back to +7 index points from last month’s stronger read (however they remain high).

Businesses reported that trading conditions (down 11 index points) were the primary reason for the decline in business conditions. The decline was seen across most industries with the notable exception of recreation and personal, which has been slowly improving as restrictions ease.

That said, all three sub-indexes remain in positive, expansionary territory.

NAB Group Chief Economist, Alan Oster said, “Business started the year on a more optimistic note, even as conditions eased from the strength we saw in December. Importantly, employment conditions remain in positive territory – so overall businesses are still expanding their workforce.”

When breaking down the results by state, there was a very sharp fall in business conditions in South Australia. In trend terms, conditions remain more favourable in the smaller states with Victoria and New South Wales lagging behind.

Business confidence is improving in the states, with Queensland seeing the highest gain of 17 points. Tasmania and New South Wales also saw gains, while Western Australia and South Australia saw declines. However, in trend terms, confidence is highest in New South Wales, Victoria and Western Australia (see graphs below).

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

Focusing on the retail and wholesale sectors, business conditions have made strong improvements since mid-2020 (see graph below).

Business conditions in retail and wholesale (net bal., trend). Source: NAB Business Survey January 2021.

The survey suggests that the retail sector has benefitted from the support to households incomes via wage subsidies and income support, as well as the stage 2 tax cuts that were brought forward.

Capacity utilisation has also improved in the retail sector, rising to above average levels across all industries.

“We hope to see capacity utilisation rise further over coming months as demand picks up, which should, in turn, see businesses consider expanding capacity through hiring or investing,” said Mr Oster.


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

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