NAB says conditions and confidence in Australian economy still negative

Business conditions have gone backwards for the month of August as ongoing lockdowns in Victoria smother the prospect of Australia’s economic snapback.
Latest figures from National Australia Bank’s monthly business survey shows conditions in August had slipped, reversing the gains experienced in the previous month.
Business conditions fell six points to an index position of negative six, which has been fuelled by a large fall in the bank’s employment index. NAB chief economist Alan Oster said the fall in the employment index by 11 points was suggesting a continued weakening in Australia’s labour market because of the coronavirus pandemic.
The decline in conditions was broad based across the states and territories.
“The weakness was primarily driven by a deterioration in the employment index – suggesting that while the economy has generally begun to open up, the labour market is still weakening,” he said. “The fact that the other states have seen a pullback suggests that the virus continues to pose a risk everywhere, not just states with significant containment measures in place.”
The survey identified business confidence improved six points; however it remains weak at an index position of negative eight points.
Mr Oster noted confidence across the economy remained “fragile” and recovery across industries uneven. “Confidence will continue to be impacted by news around the virus which has generally been more positive recently,” he said.
“In combination with weaker forward orders and a low level of capacity utilisation, it suggests that conditions may also soften before they get better.”
NAB is expecting the slump in activity during the sector quarter of 2020 and ongoing lockdowns in Victoria are likely to lead to a protracted recovery and a further rise in unemployment.

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