The Bank of Australia business confidence index jumps in January

Bayanalysis - The National Australia Bank's Business Confidence Index jumped to 10 in January 2021, up from 5 "upwardly revised" in December 2020, according to the National Australia Bank.

The latest reading was well above the long-term average as Australia's economic recovery from the Covid-19 shocks gained momentum. Sentiment improved further in leisure and personal products, followed by financial and business services, wholesale and manufacturing.

In contrast, business conditions fell sharply to 7 (versus 16) in the same two comparative periods mentioned above, driven by declines in all three sub-components: trading (11 versus 22), profitability (9 versus 13), and employment (3 versus 10). .Meanwhile, capacity use has increased and is now in its long-term average in addition to being close to the pre-pandemic level (81.0 vs. 80.8).

Forward orders decreased and just below the average (1 versus 2). "The public work started in a more optimistic manner,Alan Oster, chief economist at NAB Group, said, "Even as conditions wane from the strength we saw in last December, and most importantly, employment remains in positive territory."

It is worth noting that the highest decline in the business confidence index was in March of last year 2020, when it recorded 66, while the highest growth was at 22. 

The monthly business confidence survey is based on a telephone survey of nearly 600 small, medium and large non-agricultural companies.

The survey measures expectations of business conditions for the upcoming month and is a simple average of trading, profitability and employment indicators, reported by respondents to their companies.

  Indicators are calculated by taking the difference between the percentage of respondents who nominated good or very good, or high, and those who nominated poor, very poor, or low.