Business confidence falls from high


chart,negative,red,graph,decreaseBusiness confidence has fallen from a three and a half year high as weak trading conditions offset a short lived boost from the election of a new federal government.

National Australia Bank’s monthly business survey shows confidence fell to five points in October, from 12 in September.

NAB’s measure of business conditions remained subdued at -4 points.

The latest numbers show September’s bounce in business confidence was meaningless without policy changes to stimulate hiring and investment, JP Morgan economist Ben Jarman said.

“Not surprisingly given the lack of change in fundamentals, in October a significant amount of post-election shine has come off business confidence,” he said.

NAB economists said confidence slipped post-election, while forward indicators such as stocks and capacity utilisation were also poor, paring back earlier gains.

“Businesses may have re-assessed their expectations about future activity in the changed political environment given the continued weakness in actual business conditions,” NAB economists said.

“Nonetheless, overall confidence remains relatively higher than the well-below-average levels over the previous three years… Low interest rates and the improving asset market may still be helping.”

There was also an improvement in mining sector conditions in October, thanks to rising commodity prices “which were supported by heightened expectations that the US Federal Reserve will postpone tapering its $US85 billion monthly debt-buying program until early next year”, NAB economists said.

But Jarman said an improvement in business conditions in mining was “exactly the wrong type of uplift”, given the wind down in mining investment.

“The non-mining economy needs to be picking up for growth to stabilise in 2014,” he said.

CommSec economist Savanth Sebastian said September’s lift in confidence had more to do with getting the election out of the way rather than a substantial lift in activity, while the high Australian dollar would have made life difficult for exporters.

“Businesses are still feeling chipper about life, however tough trading conditions have dampened the rather euphoric levels of confidence recorded in September,” Sebastian said.

UBS economist George Tharenou said the disappointing survey indicated a lower Australian dollar was needed to deliver better business conditions.


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