While business conditions did improve slightly in the month of May the overall trend remains negative and at levels last seen coming out of the GFC, according to NAB’s monthly business confidence survey.

While the service sector remains weakest, and all sectors are down, a modest improvement in conditions has been observed as the economy slowly begins the process of reopening. 

Trading conditions and profitability rose during the month particularly in the retail sector and transportation, as customers hoarded goods, set up home offices, and shifted to online shopping and home delivery.

“While some coronavirus containment measures have eased, there are still restrictions in place and the service sectors which are most impacted by these measures continue to show the weakest conditions,” NAB chief economist Alan Oster said. 

When asked directly about the impact of the COVID-19 virus on business, on average 11 per cent of the business sector reported a decline in revenue.

“The share of respondents reporting being impacted by COVID-19 has broadened significantly since the period between late February and early March. This reflects what we already know: that the impact on the economy has been very wide-spread,” Oster said. 

And according to Oster, forward orders suggest short-term activity will remain weak which, combined with low capacity utilisation and weak confidence, points to an ongoing restraint in capital expenditure. 

“The business survey points to a very large fall in activity for Q2 following the fall recorded in the Q1 national accounts last week,” Oster said. 

“We will continue to closely watch the recovery in confidence, as it will likely be a key factor in how businesses recover from the largest downturn in the economy since the 1930s.”