Businesses peer through the gloom as conditions hit three-year trough

Business confidence picked up in July, despite trading conditions worsening to hit a three-year low, with the retail and wholesale sectors hardest hit, according to a new report.

The NAB monthly business survey found that business confidence picked up by seven points to register +4. This is a marked improvement on the minus two and minus three levels recorded in May and June respectively.

NAB said that good news out of Europe, interest rate cuts and the clearing of the carbon tax “hurdle” had led to the pick-up in business sentiment.

However, the brighter outlook does little to disguise the difficult reality faced by many Australian businesses, with NAB’s index falling by two points in July to minus three.

Almost every industry reported a downturn in profitability and trading conditions, although there was a slight pick-up in hiring intentions.

NAB’s report states: “Activity in the generally poorer performing industries – retail, wholesale and construction – tended to deteriorate further in the month; the clear exception to this was manufacturing where conditions improved a touch, albeit while remaining poor.”

“The persistent divergence in industry conditions indicates that the Australian economy is undergoing a structural transformation towards mining and service-based industries, and away from traditional manufacturing and discretionary retailing.”

For start-ups looking for funding, borrowing conditions eased slightly in July, although they remain challenging.

NAB’s net index for borrowing rose from minus five to minus four in July, with the proportion of businesses requiring no finance rising from 63% to 66%, suggesting a decrease in demand for credit.