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Australian business sentiment falls in July, business conditions rebounds by 8 points

Australian business sentiment fell in the month of July. The business confidence index dropped 14 points to -14 in the month, overshadowing the 8 point rebound seen in business conditions. New South Wales and Victoria saw the sharpest falls in sentiment, and confidence dropped throughout all industries.

NAB’s month business survey was conducted over the final 10 days of July, ending before the 2nd August announcement of the move to Stage 4 restrictions in Melbourne and Stage 3 in regional Victoria. But rising case numbers in Victoria and elsewhere, the initial Stage 3 restrictions and speculation around tighter restrictions were sufficient to put a marked dent in business sentiment. Consumer confidence has also worsened sharply over recent weeks, noted ANZ in a research report.

Business conditions in Australia rebounded by 8 points to reach zero in July, the equal highest result since January and February. Conditions were even reported to have increased 5 points to -6 in Victoria, in spite of Melbourne and the Mitchell shire returning to Stage 3 restrictions on 8 July. NAB noted the strong rebound overall but said “ it may reflect activity coming of a low base”.

While all three components of conditions – profitability, trading and employment – saw strong gains in July, leading indicators such as capacity utilization and forward orders saw more modest rebounds.

“Along with the plunge in confidence, this suggests that the rapid improvement in conditions in the past three months is unlikely to continue. While Victoria will be hit hardest, conditions elsewhere are also likely to be affected, particularly in New South Wales”, added ANZ.

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