The latest CommBank ‘Flash’ Purchasing Managers Index (PMI) recorded an even steeper drop in private business activity this month compared to the last, as a result of coronavirus.
In April, the headline Flash PMI dropped to 22.4, down from 39.4 in March. For context, any reading below 50 indicates a decline in activity on the previous month.
CommBank’s Head of Australian Economics, Gareth Aird said the results aren’t a shock given that businesses across the nation have closed their doors while customer demand both locally and internationally have also shrunk.
“The collapse in the headline Flash PMI index for April reflects the severe contraction in economic activity currently taking place due the coronavirus,” he said.
This data comes just days after Reserve Bank Governor Phillip Lowe’s forecast that Australia could experience the biggest contraction in national output and income since the 1930s.
Services take the biggest blow
This month, the services sector copped the worst of the coronavirus crisis, with its PMI index sliding to a low 19.6, down significantly from 38.5 in March. Service providers lowered their prices, as input costs fell with reduced wages and plummeting fuel prices.
The manufacturing PMI index also tumbled, although to a lesser degree, sitting at 45.6 in April, compared to March’s 49.7.
“The services sector has been hit a lot harder than the manufacturing sector. And the pace of job shedding is concerning though not surprising given the large number of Australian businesses that remain shut,” Aird said.
Despite a nosedive in confidence, companies have expressed hope that business would return to normal over the coming year.
But Arid said their ability to bounce back will “be dictated in large part by the duration of the enforced shutdown and also by the success of efforts to eliminate the spread of the virus.”
COVID-19 relief options for businesses
If you’re a small business struggling to stay afloat, here are a couple of options to keep in mind:
- Ask your bank for help: Several lenders have stepped up with initiatives to help affected small businesses, including deferred repayments and waived fees. Even if your bank hasn’t made any official COVID-19 announcements, they should have a financial hardship policy in place, so it’s worth reaching out to get the support you need.
- Join the SME Loan Guarantee Scheme: If you’re after extra working capital to get through tough times, then this route may be your best bet. Under the new SME Loan Guarantee scheme which runs until 30 September, the federal government will guarantee 50% of all three-year unsecured business loans of up to $250,000 issued by eligible lenders.
For a more comprehensive list of assistance options, check out our guide to Australia’s coronavirus financial support for small businesses.
Page last updated October 30, 2020
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