Business confidence plummets as rates set to climb

The likely prospect of further interest rate rises and continued sharemarket volatility have pushed business confidence levels to the lowest point seen since 2001, according to the NAB monthly business survey released today.

Business confidence fell by nine points in January to fall four points below the 50 point line separating positive from negative sentiment. The business confidence reading is the lowest taken by the survey since the terrorist attacks of 11 September 2001.

“If this proves to be sustained, we would expect to see downward adjustment in actual conditions, and notably capital expenditure plans, during the next few months or so,” NAB says.

The survey also showed that business conditions have dropped four points to 13 and profitability had fallen by six points to 13 in the first month of 2008.

The negative result is also reflected in a new Dun & Bradstreet survey in which business owners and managers say they expect to face rising prices and falling profit levels in the months ahead.

Over 60% of firms surveyed by D&B said they expect to lift prices in the June 2008 quarter, well below the 33% of business executives who said they expected profits to rise.

On the markets, a strong rise in the early minutes of trading had been erased by midday, leaving the S&P/ASX200 down 0.2% to 5538.8 at just before 1pm.