- Business confidence is faltering across Australia’s retail and services sectors.
- Expectations for sales, profits and selling pressures all weakened from the June quarter.
- The results are similar to those seen in the NAB’s Australian business confidence survey.
Business confidence is faltering across Australia’s retail and services sectors, according to new research released today.
illion’s latest Business Expectations Index — a survey of 1,200 business executives across the country — fell 8.3% to 21.7 points in the September quarter survey, driven by a noticeable downturn in sentiment towards the outlook for sales, profits and selling prices.
illion was formerly known as Dun & Bradstreet.
Stephen Koukoulas, economic advisor at illion, said the survey points to a softer September quarter for the Australian economy.
“It is likely that the broadly-based decline in the housing cycle and on-going concern about household spending and weak wages growth have weighed on the outlook,” Koukoulas says.
“This mix of news is all but certain to see the Reserve Bank hold official interest rates steady for the next few months, and if there is any further loss of momentum in coming months, the door may open for an interest rate cut.
“This would be especially the case if expected selling prices, inflation in other words, fall further.”
Of all the sectors surveyed, Koukoulas said executives in the retail sector were particularly negative about the future.
“The retail sector is the main area of concern with both expectations and the actual performance falling sharply,” he said.
“Actual sales were reported to be below zero, which is the first time it has been this low in nearly four years.”
Koukoulas said the gloomy outlook also showed up in expected employment, which fell more than 27% in the latest survey, a somewhat ominous outcome given retail is the second-largest employer in Australian behind healthcare.
As seen in the chart below, sentiment among services executives also weakened in the latest survey, another unwelcome development given it’s the largest part of the Australian economy.
While sentiment is clearly suffering to soften, Koukoulas says it’s not time to panic just yet.
“The outlook is not yet a concern, but there has been a clear downturn in business expectations,” he said, acknowledging that headline expectations index is still up 29.6% from a year ago.
Underlining the need for caution, while sentiment in the massive retail and services sectors weakened, broader measures on employment and capital investment remained firm in the latest survey.
Employment expectations rose 4.8% from the previous quarter while capital expenditure managed to hold onto most of the gain achieved over the past year, fitting with strength seen in actual outcomes in the latest survey.
The survey results contained in the illion report are similar to those reported in the separate business confidence survey released by the National Australia Bank (NAB).
In May, the NAB survey reported declining sentiment towards sales and profitability, contributing to the headline conditions index pulling back from record-high levels in April.
Business confidence also softened, falling back to the series long-run average.
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