Daily Commentary BY THE CURVE TEAM –

Business Recovery Slow

30th of October, 2020

NAB’s quarterly business survey data for Q3 follows a similar pattern to other indicators as the economy recovers.

A V shaped recovery, where the economy instantly rebounds to pre Covid levels after the initial spread of the virus has not come to fruition. The emerging theme is economies are recovering but plateauing at levels below pre-Covid.

NAB’s quarterly business survey for Q3 shows confidence recovered from -15 to -10. The employment index likewise recovered, rising to -14 from -29.

Business conditions was the biggest improver, rising to -4 from -26. Even this though remains below long run averages despite the significant improvements.

US GDP data released overnight followed the same theme. Q3 GDP was up 7.4% year on year after falling 9% in Q2.

The bounce recovered two thirds of the 1st half of the years falls. Significant government support for the data period was a major factor in the bounce, as well as easing lockdown restrictions.

Indicators not returning to pre-Covid levels is to be expected. International borders remain shut and many uncertainties, especially around the spread of Covid-19 remain.

Ideally, international borders will be able to open by the end of next year and businesses and consumers will respond quickly to accommodating fiscal policies. There is no guarantee though that this will be a speedy process.

Credit data for September is released today. After 3 consecutive months of falls a recovery in credit will be what the RBA especially is looking for.

Josh Stewart

Associate- Money Markets