NAB’s monthly business survey’s confidence index has fallen 14 points to an index position of negative 14, with significant concerns about future conditions in the New South Wales and Victorian economies.

Its business conditions did improve for the month of July, rising eight points to an index position of zero, highlighting broader improvements in trading conditions since the initial lockdown period.

NAB chief economist Alan Oster said while conditions were improving to be broadly around pre-COVID-19 levels with the exception of Victoria, overall confidence remained highly fragile.

“While the rebound in conditions is encouraging, the fall in confidence even prior to the announcement of stage four restrictions in Melbourne demonstrates that businesses will remain very cautious given the great uncertainty around the virus at the moment,” Mr Oster said.

“It also highlights that the business sector will require ongoing support through the recovery phase until the economy can get back on its feet.”

NAB said the retail and construction sectors had the weakest confidence compared with the rest of the economy.

Forward orders and capacity utilisation levels improved but remain at historically low levels.

“While the improvement in conditions is very welcome, capacity utilisation and forward orders point to ongoing weakness overall,” Mr Oster said.

“Therefore, with confidence still fragile, there is some risk that conditions lose some of their recent gains in coming months.”