Australian PBI reports business conditions slump again in August

The Australian Industry Group Australian Performance of Business Index (Australian PBI) fell by 2.1 points to 42.6 in August, pointing to a further contraction in activity and at a faster pace than in July as renewed activity restrictions and border closures took effect (results below 50 points in the Australian PBI indicate deteriorating business conditions, with lower numbers indicating a faster pace of deterioration in the month).

Business conditions remained negative across most sectors, with bright spots persisting only in food-related manufacturing, distribution and retailing. The worsening slump in August comes after the Australian PBI recorded its lowest monthly result in April (27.2 points) and Australia experienced the worst contraction in GDP on record in Q2 2020 (-7.0% q/q and -6.3% pa).

Ai Group chief executive, Innes Willox, said, “The further slump in business conditions in August comes after the record 7% decline in GDP in the June quarter and dampens remaining hopes of a V-shaped recovery. The Australian PBI reading for August, though disheartening, is not at this stage pointing to a further fall in GDP in the current quarter. Much will depend on the impact of the ongoing Victorian restrictions that are weighing down activity in that state and holding back recovery elsewhere. The scale of the downturn to date and the severity of the hit to confidence mean that active measures to stimulate the economy will need to continue for some time yet.”