Australian business conditions index falls further in April, improvement in conditions likely in May

Business conditions of Australia worsened further in April, with non-essential services shut down throughout the month. Business conditions dropped 12 points to -34 in the month, while business confidence rose 20 points to -46, which remains weaker than during the GFC.

All business conditions’ components, such as profitability, trading and employment, dropped in the month as capacity utilization shrank by a further 3 percentage point to 72 percent. It is difficult to find many positives in the data, but exports have held up reasonably well, only 6.6 points below their long-run average.

The fall in business conditions decelerated throughout the eastern mainland states, and conditions even picked up in Tasmania. However, South Australia and Western Australia recorded bigger falls in conditions in April than in March.

Business conditions continued to be softest in recreation and personal services. However, it was wholesale trade and construction that saw the largest monthly falls. Both seem to have experienced a lagged response. Mining saw a sharp turnaround in conditions but continues to be in negative territory.

“In May, we could see an improvement in conditions as some parts of the economy reopen”, said ANZ in a research report.