Little chance of Christmas cheer as business confidence hits record-low

Business confidence has fallen to its lowest level since April 2009, NAB’s Monthly Business Survey reveals, with the bank warning there is little hint of a pre-Christmas revival.

According to NAB, the “brakes firmly tightened” on activity in November. Business conditions remained subdued at -5 index points, indicating the economy is growing below trend.

Business conditions were particularly weak in retail, wholesale, manufacturing and construction. Recreation and personal services, along with transport and utilities, were the only industries to report positive conditions.

With regard to the states, conditions weakened notably in WA, South Australia and Queensland. It’s worth noting these states are more heavily exposed to mining. Conditions in mining have deteriorated rapidly over the year.

Meanwhile, conditions “improved a touch” in NSW and Victoria, according to NAB. But overall, business conditions were negative in all states in November.

The business conditions index is currently 10 points below its medium-term average of five index points.

But perhaps even more concerning is the slump in confidence, which has fallen to its lowest level since April 2009. And according to NAB, there is little chance of a pre-Christmas revival.

“Pessimism is the word this month… Confidence did not rise in any sector and fell especially hard in manufacturing,” NAB said.

Confidence was also shaken considerably in transport and utilities, and recreation and personal services.

Unfortunately, there are no signs of near-term optimism, with all industries expecting activity to deteriorate further.

“Firms may be concerned about a soft global economy, fiscal tightening, a soft labour market and high Australian dollar,” NAB said.

“Also providing little support for a near-term rebound is the weakness in indicators of future demand.”

Forward orders, capacity utilisation and stocks have all fallen to their lowest or equal lowest levels in around three and a half years.

Meanwhile, confidence deteriorated across all states, with particularly heavy falls reported in WA and South Australia.

Boom state WA is now the most pessimistic state, while sentiment in South Australia, Victoria and NSW isn’t much better.

As with industries, all states expect activity to deteriorate in the near term.

NAB paints a dreary picture for the year ahead, saying there is “no indication” the business environment is about to improve.

“Risks in the US and Europe are depressing confidence,” it said

An elevated Australian dollar, fiscal tightening and very weak confidence are expected to weigh on near-term activity, while “frictional pressures” will keep the unemployment rate elevated.