NAB on Tuesday released the results of its March business survey which shows business conditions at a record high across all states and industries, reflecting a recovery more rapid than anticipated following record lows in early 2020.
Respondents reported a rise in business conditions, which rose by 8 index points to 25 index points, despite an impending end to JobKeeper which was forecast by the Treasury to cost up to 150,000 jobs.
“This is a very solid survey result,” said Alan Oster, chief economist at NAB. “Businesses are telling us activity continues to increase at a very healthy rate, as we have moved past the rebound phase in activity with the earlier removal of pandemic-related restrictions.
“Overall, the recovery over the last year has been much more rapid than anyone could have forecast.”
March also saw business confidence fall by 3 index points to 15 index points, but remains “well” above average.
Business confidence took a dip across all industries as a result of slowed wholesale and manufacturing, with the mining, finance, business and property, and construction sectors reporting the highest levels of confidence. Retail and wholesale reported the lowest levels of confidence.
“Despite the dip in confidence in the month, it remains well above its long-run average,” Mr Oster said.
“This in combination with a very strong read for forward orders points to ongoing strength in activity — which hopefully sees conditions remain elevated, even as we pass through the end of the JobKeeper program.”
However, capacity utilisation rose again in March, now at 82.3 per cent, with all industries except the recreational and personal sectors now exceeding pre-pandemic levels and either at or above their long-running averages.
“Adding strength to the result for business conditions is the high level of capacity utilisation,” Mr Oster said. “Conditions tell us activity is lifting strongly; capacity utilisation tells us we are already a high level.
“This is particularly encouraging as we move through the tapering in fiscal support and out of the rebound phase of the recovery. It suggests that there may be a lift in business investment and hiring, as the underlying pace of growth appears relatively healthy.”
In the wake of rising employment, businesses also reported higher rates of capital expenditure in March, despite slowly rising product price inflation.
“Indeed, reported capex has now also recovered and provides some optimism that investment will continue to increase given a building pipeline of work — strong forward orders — and high rates of utilisation,” Mr Oster said.
“Price pressures have lifted in recent months, largely on the input side, with a lift in employment and some evidence of higher input costs.
“Final products price inflation has also risen but are tracking at a slower rate, suggesting that not all of the cost increases have been passed onto the consumer.”