Business confidence is falling off the back of increased market uncertainty, new research has revealed.
According to credit and commercial insights database illion, business confidence is faltering. illion’s Business Expectations Survey of 1,200 executives found that they were less confident about the strength of business for the upcoming September quarter.
The Business Expectations Index revealed an 8.3 per cent drop in confidence from the previous quarter, falling to 21.7 per cent.
However, the index remains 29.6 per cent higher than the September quarter of 2017.
CEO of illion Simon Bligh attributed the drop to the ongoing threat of global trade conflicts and mixed economic conditions in the domestic market.
“Trade risks have intensified over the past few months and business leaders, particularly those with a heavy focus on export markets, are watching these developments closely,” the CEO said.
“Economic data also continues to remain mixed, both in Australia and abroad, and we are seeing leaders take a cautious approach to spending and investment in these uncertain times.”
The index also revealed that sales and profits expectations also dropped, falling to 18.3 per cent and 13.0 per cent, respectively.
illion economic adviser Stephen Koukoulas noted that the further signs of cooling in some economic indicators could be weighing on business projections.
“The outlook is not yet a concern, but there has been a clear downturn in business expectations for the trifecta of sales, profits and selling prices, which are the key drivers of the macroeconomic conditions in the economy,” Mr Koukoulas said.
“It is likely that the broadly based decline in the housing cycle and ongoing concern about household spending and weak wages growth have weighed on the outlook.”
Mr Koukoulas claimed that continued weakness in business confidence could prompt the Reserve Bank to cut the official cash rate.
“This mix of news is all but certain to see the Reserve Bank hold official interest rates steady for the next few months, and if there is any further loss of momentum in coming months, the door may open for an interest rate cut,” the economic adviser added.
“This would be especially the case if expected selling prices, inflation in other words, fall further.”
The research also revealed that the retail sector expected significant declines across all indices over the September quarter, with profit expectations dropping by 79.8 per cent from the previous quarter.
“The retail sector is the main area of concern, with both expectations and the actual performance falling sharply,” Mr Koukoulas said.
“Actual sales were reported to be below zero, which is the first time it has been this low in nearly four years.
“The gloomy outlook for the retail sector also showed up in expected employment, which fell over 27 per cent in the last quarter.”
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