Australian business is losing confidence in the economic outlook

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Australian businesses appear to losing confidence in the economic outlook, according to the latest update of the Dun & Bradstreet’s May Business Expectations Survey.

The release showed that the Business Expectations Index, the average of the survey’s measures of Sales, Profits, Employment and Capital Investment, has fallen to 10.7 points for the third quarter of 2016, down from 12.7 points for Q2 2016 and 17.6 points in the corresponding quarter of 2015.

To put the result of 10.7 in context, D&B says it is still 3.5 points above the 10-year average of 7.3 points. But the continued downtrend is clear.

Worryingly the index which measures actual outcomes “plummeted to a two-and-half-year low of 4.1 points, compared with 12.7 points last quarter”, Dun and Bradstreet said. That ends three consecutive quarters of growth.

The weakness in the index and actuals suggest that concerns raised over the real level of growth in the economy after the strong first quarter GDP release could be on the money.

Stephen Koukoulas, economic advisor to Dun & Bradstreet, said that the fall in the “actual” measure shows the “performance of the economy has also weakened, which points to a slowing rate of economic growth in the first part of 2016”.

“Of even more concern,” Koukoulas said, “is the fact the weakness appears to have continued into the June quarter with expected sales, profits, employment and selling prices all reaching new lows in the current cyclical downswing. The outlook is deteriorating rapidly.”

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