Business Sector Still Under Pressure

12th of February, 2020

Business confidence still weak as conditions remain soft.

The latest monthly business survey has confirmed that the sector remains downbeat as the new year gets under way. The positive is that the recent natural disasters and risk stemming from offshore developments haven’t had a major impact.

Confidence amongst businesses remains a little dour with the index remaining negative for the third straight month and has now been negative for four of the past five months. The slide in confidence has been under way since mid-2018, and despite a small improvement in mid-2019, seems set to continue as risks to the outlook remain.

Business confidence was also little changed in January and has been fairly stable for a number of months now, just below the long run average. Trading conditions were a little softer while profitability improved slightly. However, the big move was the employment index.

The index had been holding up well in recent months, supporting the outlook for employment growth. While the fall from 4 to 1 doesn’t suggest a collapse in employment growth, it does indicate a slowdown in the pace of growth over the coming months. This is something to watch as it is key to the RBA’s outlook.

We now look to the update on the state of the consumer when the monthly sentiment survey is released later this morning.

David Flanagan

Director - Interest Rate Markets