Daily Commentary BY THE CURVE TEAM –

Business Sentiment Follows Economy

10th of March, 2021

Yet another positive data result was released yesterday with the NAB Business Survey.

Over the prior two months sentiment and confidence had moved in opposite directions, which is unusual. In February, sentiment and confidence rose in sync to reach high levels.

Confidence rose from 12 to 16, the highest level since 2010. Conditions improved from 9 to 15, which is considerably higher than the long run average.

Encouragingly, the rises were broad based in many senses. The states for the most part have aligned. There is no longer a discrepancy with the states experiencing lockdowns and those not.

All of trading, profitability and employment increased. Employment rising from 3 to 8 is especially encouraging, as early on in the recovery employment lagged behind other indicators, which is common in economic downturns. The pick-up indicated a robust recovery.

Similar to what was written in Curve’s Monthly Insights, released yesterday, the rate of change of the survey will be of interest. The high levels now can be interpreted as businesses viewing the conditions as much more favourable than the lows of covid.

As the economy normalises, it is natural to expect business confidence and sentiment will revert back to more normal levels. The rate in which it does this is of significance. If it sustains lofty levels for longer, then the more encouraging it will be for economic activity.

Today, RBA Lowe delivers a speech and consumer confidence for March is released.

Josh Stewart

Associate - Money Markets