Business confidence rises despite sluggish conditions

Businesses are feeling increasingly confident about the next six months, even in the hard-hit retail, construction and manufacturing sectors, despite little improvement in overall business conditions.

According to National Australia Bank’s quarterly business survey, business confidence started to pick up in March, as companies shrugged off the impact of the east coast floods at the start of the year.

The survey, released this morning, showed business confidence lifted to 11 index points in the quarter, from five index points in the previous quarter and nine index points in the previous corresponding period.

Current business conditions were steady at two index points, versus five index points in the previous corresponding period.

Trading levels fell to one index point, from three index points the previous quarter, while profitability also worsened. It dropped to -2 in the three months to March 30 from -1 in the three months to December 31.

Employment rose one point to six index points for the quarter, while forward orders were flat at -2 index points.

Rob Brooker, head of economics and commodities at the NAB, told SmartCompany the survey suggests that things are turning around.

“I think firms are thinking they’ve gone through a rough patch and things will start to pick up over the next six to 12 months,” Brooker says.

And while interest rates are a concern for businesses, they are not “front of mind” anymore, he says.

NAB is bullish on Australia’s economy because of its mining industry, the big income effects from the terms of trade, and the nation’s key relationship with China, Brooker says.

The catastrophic weather events and concerns over fuel prices and agricultural prices had nonetheless bitten confidence earlier in the year, he said.

And despite a lift in confidence for the retail, wholesale, manufacturing and construction sectors, conditions remain patchy at best.

“Retail margins are still under pressure in the March quarter,” Brooker says.

“And the wholesale, manufacturing and construction are still struggling.”

The bank says the survey suggests that business capital spending plans over the next 12 months increased in the March quarter.

“Short-term employment expectations continue to improve and the longer-term expectation remains robust,” NAB says.