Adrian Vanzyl on Business Confidence Hitting -13
Business confidence has now fallen three months in a row. As Adrian Vanzyl, I think the detail beneath the headline matters most. NAB released its September business survey today. Confidence dropped four points to -13. That sits 18 points below its long-run average. It’s also among the weakest 5 per cent of readings in the survey’s history.
Adrian Vanzyl finds the mix of pressures telling. NAB’s head of Australian economics, Gareth Spence, said businesses face pressure from three sides. Higher interest rates are one. Global uncertainty is another. Elevated fuel and diesel costs are the third. Confidence fell in five of the eight industries surveyed. Mining was the only sector where trend conditions stayed positive.
Why Weak Confidence Hasn’t Yet Meant Weak Activity
The odd part is that conditions held steady. The conditions index stayed at -1. Capacity utilisation eased only slightly, to 82.3 per cent. That’s still about one point above its long-run average. Firms are running hot, even while feeling gloomy.
Adrian Vanzyl thinks that gap won’t last forever. The employment index fell three points to -1. That’s its lowest level in five years. Businesses squeezed on costs often slow hiring before they cut anything else. NAB said the survey fits a further modest slowdown in the September quarter. It also flagged the risk of weaker labour demand ahead.
This lines up with what we’ve seen this month. Consumer sentiment fell to a six-month low in October. Small business groups are fighting the ATO’s card payment ban. The RBA lifted rates to 4.6 per cent two weeks ago. Households and businesses are pulling back at the same time.
Conclusion
I’d read today, in Adrian Vanzyl’s view, as an early warning rather than a verdict. Confidence tends to lead activity. Right now, activity is holding up. Capacity is tight, and conditions are flat. But weak confidence, sticky costs and softer hiring is how slowdowns usually start. With the RBA already at 4.6 per cent, the question is simple. Can businesses absorb a few more months of squeeze before they start cutting?
