Australian business conditions and sentiment rebound in May, but remain weak

Australian business conditions rebounded in May, consistent with the gradual rollback of COVID-19 restrictions. This has permitted some businesses to reopen, extend trading hours or increase activity and is seeing a rebound in demand.

Business conditions rebounded by 10 points to -24 in May. The beginning of the recovery was mainly due to profitability and trading, which rose 15 points and 13 points to -19 and -18, respectively. However, employment disappointed by rising only 4 points to -31.

Meanwhile, business sentiment rose 26 points to -20, above the weakest point of the GFC. Capacity utilization improved 2.6 percentage points to 74.5 percent; however, this is still below the lowest point of the GFC (79.1 percent).

Region wise, business conditions improved greatly in New South Wales, Victoria and South Australia. Queensland and Western Australia saw minor rise.

Business conditions in recreation and personal service rebounded by 12 points, but this is still the softest sector. Finance, business and property services and transport and utilities only saw marginal rebound but it was more positive for wholesale trade, manufacturing, construction and retail.

“After an initial rebound as restrictions are progressively lifted, we think it will take a long time for conditions to recover to their pre-COVID-19 level”, said ANZ in a research report.