Daily Commentary BY THE CURVE TEAM –

Business Survey Volatile

10th of February, 2021

A variety of factors are leading to an unpredictable environment for businesses.

Business confidence rose to 10 from 5 in January. Conditions on the other hand fell to 7 from 16.

After rising largely in sync until November, the last two months conditions and confidence have been uncorrelated. This is indicative of the unpredictable environment for businesses, as lockdowns and border closures have been dependant on covid cases and will likely continue to be the case at least for the next few months.

There is evidence though that businesses are showing foresight. Confidence is well above long run averages despite conditions being only at the long run average.

Victoria has posed an upside for the survey since unwinding their harsh lockdowns, but this seems largely fulfilled. Victoria leads confidence among the states and conditions have caught up with NSW, albeit are the lowest of the states.

Industries most effected by covid pose the next obvious upside for the business survey. Recreation and personal services continues to lag other industries, which will likely improve if a vaccine is distributed and borders open internationally.

Gains in this industry will likely be offset by declines in retail and wholesale, which are at lofty heights. Waning government subsidies and shifting spending away from retail to services will hit these industries.

Today, consumer confidence for January is released.

Josh Stewart

Associate- Money Markets