business confidence falls

Business confidence falls sharply in August

Business confidence dropped in August, thanks largely to increased global uncertainty, major falls in equity markets and a widespread fear of European debt.

According to the NAB monthly indicator, Confidence has lowered across all industries, with the exception of Recreation, Personal Services and Construction. The industries with the biggest fall in confidence were Finance, Business and Property.

Business conditions have got marginally worse, declining 2 points to -3 index points. The index is now 9 points below its long-term average. Forward orders remained around current levels and there was little change in capacity utilisation.

The multi-speed Australian economy was clear again in the results. While manufacturing conditions continued to fall sharply in August, Mining and the Service sectors generally remained strong. Recreation and Personal Services strengthened to become the strongest sector.

Labour costs growth have remained high, final product prices rose modestly while retail price growth was soft after falling sharply in the previous month.

Global economics have been burdened by a series of disappointing US and European indicators, big falls in equity prices and political obstacles in the US and Euro-zone. Commodity prices have remained high, reflecting strong global demand. Although most of the world is experiencing slowdown, the outlook for China and India is strong growth.

Australian growth forecasts have remained largely the same. The unemployment rate is marginally higher, because restructuring affects the short-term employment rates. GDP growth is forecast from 1.9 per cent in 2011 to 4.1 in 2012. Core inflation is forecast to exceed 3 per cent by mid 2013.

NAB said it expected the Reserve Bank of Australia (RBA) to keep the cash rate steady for a considerable period with a 25-basis-point hike expected in mid-2012.

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