Economy: Business Confidence To Fall

By Glenn Dyer | More Articles by Glenn Dyer

With business and consumer confidence at the lowest point for 17 years, more gloom with the National Australia Bank forecasting a further fall in business confidence.

The NAB’s quarterly business survey, to be officially released later today, will show that business confidence is expected to fall further in the September quarter.

Big companies, medium and small are becoming gloomier, with only the still buoyant mining sector really positive,

The news came as the Housing Industry Association reported a surprise rise in home sales among the country’s 100 biggest builders last month.

A Housing Industry Association survey of the nation’s 100 biggest builders and developers found that house and unit sales rose by 4% last month.

Detached house sales increased by 2.6% while volatile multi-unit sales jumped 15.5% in June as there was a 20% rise in NSW and 16% in WA, which offset falls in Queensland.

Home sales rose by just 0.4% in the first half of 2008, a better indication of the extent of the slowdown in activity.

The Australian Bureau of Statistics releases its latest building approval figures for June tomorrow.

In a statement yesterday ahead of the release, the NAB’s economic department said that many firms report negative expectations – especially home builders, household goods & car retailers, real estate agents and transporters. Only mining & health were positive about near term.

"Overall expectations for business confidence have fallen further to relatively pessimistic levels for the September quarter 2008, according to the latest quarterly surveys of both corporate/larger firms and small, medium and emerging (SMEs) businesses by National Australia Bank (NAB).

"NAB’s Business Confidence Expectations Index is down 4 points to negative 8 points for the September quarter – 18 points lower than a year ago or its largest four quarter fall in over a decade – relatively pessimistic albeit still well above levels reached in the early 1990s.

"A triple whammy of reduced activity/lower customer confidence, rising costs (borrowing, oil & other key purchase costs) and volatile & lower equity markets continue to weigh on the business outlook," said Jeff Oughton, NAB’s Head of Australian Economics.

"That is, almost 30% of Australian businesses expect a minor deterioration in their industry conditions in the September quarter, in contrast to about 20% of firms that expect a minor improvement, while only a few businesses anticipate either a significant improvement or deterioration and over 40% of firms expect no change."

The bank said that business confidence has fallen to a broadly similar level across all business segments – both SMEs (small, medium & emerging) and larger businesses.

"For the September quarter, there were further significant falls in confidence expectations across most sectors amongst both SMEs and bigger businesses; only near term confidence amongst mining and larger business services rose for the September quarter.

"Furthermore, only the former has higher confidence than recorded since the recent peak in overall confidence in mid 2007.

“As a result, confidence in the near term for most SMEs and bigger businesses is significantly negative for the September quarter across most sectors, with the lowest confidence amongst SMEs and bigger firms in residential construction, household goods and car retailers and property services (mainly real estate agents) and transport related to weak housing markets and rising oil prices.

"In contrast, positive expectations for confidence remain in mining and to a lesser extent SME health professionals, SME construction services (i.e. trades) and larger business services (mainly big legal & accounting firms)."

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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