Business conditions improve marginally


Business conditions stabilised over the June quarter, with expectations for the September quarter showing slight signs of improvement

Business conditions improve marginally
Business conditions improve marginally

Business conditions stabilised over the June quarter, with expectations for the September quarter showing slight signs of improvement.

The August Commonwealth BankAustralian Chamber of Commerce and Industry (ACCI) Business Expectations Survey released today reveals the extent of recent economic hardships.

Businesses expect most of the survey indicators to improve further over the next three months, except for the index of export sales, which is set to decline further.

The index of general business conditions rose marginally over the June quarter to 35.4, almost 18 points below the five-year average of 53.1.

According to the survey, businesses predict the pace of decline in business conditions to slow significantly over the next three months, with the expectations index strengthening to 43.1 for the September quarter.

The index of expected economic performance bounced back a strong 6.5 points over the June quarter, rising to 36.9.

Despite being the highest level since June 2008, the index remains in negative territory, indicating the business outlook for Australia’s economic growth continues to be weak.

While the indexes of employment and overtime utilisation are expected to improve, they remain below the 50 mark, indicating a continued contraction in employment over the September quarter.

Business investment continued to deteriorate over the quarter, with the indexes of Investment in building and structures and investment in plant and equipment falling to their lowest levels since 1994.

ACCI Acting Chief Executive Greg Evans says overall business sentiment has improved over the June quarter.

"However, we should not be complacent about the challenges facing the economy and the attendant downside risks posed to employment," he says.

"Hence, it is paramount for all policy levers to work simultaneously toward mitigating the scale of the economic downturn and more importantly to encourage business investment which underpins job creation and economic recovery."

Over the June quarter, the index of wage growth continued to fall to 51.8, the lowest since the survey began in 1994.

However, the index remains above the 50 mark, indicating that wages continue to grow, albeit at a much slower pace.

The index of selling prices also suffered, falling to 43.6 in the past three months, from 46.5 in the March quarter.

Employment remains virtually unchanged, with the index stabilising at 40.6.

Commonwealth Bank Executive General Manager of Corporate Financial Services, Robert De Luca, says it is good to see business has not lost confidence.

"While businesses across Australia continue to find the environment challenging, with employment remaining weak and the selling price for goods and services declining, businesses of all sizes expect conditions to improve over the coming months," he says.

"These latest survey results are indicative that the fundamentals remain in place for Australian businesses. Those businesses that are prudently capitalised and well-managed are better positioned to take advantage of longer-term growth opportunities as the economic environment improves."

Profit performance improved slightly over the June quarter, with the index of profits rising 0.5 points to 33.9.

Businesses expect the rate of decline in profits to slow significantly over the next three months, with the expectations index remaining almost eight points below 50.

The Commonwealth Bank–ACCI Business Expectations Survey assesses the business conditions and confidence of 2,519 businesses nation-wide.

Results of today’s survey were collected over the April, May and June period.

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