SME confidence falls in June quarter: Midday Roundup

Confidence among small and medium-sized enterprises fell in the June quarter and remains lower than that of larger firms, a National Australia Bank survey of SMEs shows, with the high local currency, household caution and concerns over the global outlook weighing on sentiment.

NAB says the most significant falls in business confidence were reported in property, construction and finance, while confidence in health and business services improved.

“Retail sentiment is now the weakest of all industries, while confidence is strongest in business services,” it says.

Conditions improved for companies with annual turnover of between $2 and $3 million, NAB says, but were softer for those between $3 and $5 million.

High-tier firms, those with annual turnover of between $5 and $10 million, were also more confident, NAB says.

Retail sales disappoint as Aussie dollar, shares weaken

Retail sales have disappointed this morning, edging down 0.1% in June versus expectations for a 0.4% rise, and pushing a fall in the Aussie dollar to under $US1.07.

The Australian Bureau of Statistics figures show retail sales totalled $20.54 billion in June, and follow a 0.6% fall the previous month.

Department store sales slipped 3.2% while sales at household goods retailers, cafes and restaurants dropped 0.7%.

But food retailers rose 0.4%, and clothing, footwear and personal accessory retailing edged up 0.2%.

Westpac said the rise in clothing and accessories was “driven by price discounting” with the deflator for this sector falling 0.1% for the quarter.

“Compare this to the rise in clothing recording in the Q2 CPI. We would argue that consumers are being rational and buying discounted goods and ignoring those that aren’t,” the bank said.

“Given that the CPI has fixed weights, which are now five years old, the CPI missed this shift in consumptions patterns and so overstates price rises in sectors with intense competition and resulting price discounting.”

Other stats released this morning were the balance of goods and services for June, with a $2.05 billion surplus just lower than economists’ expectations and well below May’s surplus of $2.69 billion.

After starting the week well on the back of the US debt deal, the sharemarket looks set to close lower for the second day running.

At just after 11.30 AEST, the S&P/ASX200 was 2.21% lower at 4335.7 while the broader All Ordinaries index was 2.16% lower at 4412.7.

Michael McCarthy, chief market strategist at CMC Markets, says, “share prices were put to the sword overnight as fears about the state of global manufacturing took over as the concern of the moment.”

“Bond markets are painting a grim picture. Australian, Japanese, German and US bonds fell in yield to new lows on concerns for growth, while peripheral European bonds rose, reflecting ongoing default fears.”

Services index contracts in July

The services industry contracted during July, according to the latest results of the Australian Industry Group-Commonwealth Bank performance of services index.

The index jumped 0.3 points to 48.8, but that is still below the 50-point level separating expansion from contraction.

The index’s measure of employment rose 5.7 points to 51.1, although employment levels have dropped in the retail trade and finance and insurance sub-sectors. The measure of wages rose by 8.2 points to 64.9, although selling prices fell to 46.3.

“While some are expressing enthusiasm about the flow-on benefits from the resources boom, generally, the positive effects of the boom are being outweighed by consumer caution, interest rate concerns, a very flat construction sector and uncertainty over the impacts of proposed climate policy measures,” says AIG chief executive Heather Ridout.