Business confidence bounces back in ANZ survey

Retailers remain pessimistic but all other activity indicators rose.
ANZ chief economist Sharon Zollner says retailers' pessimism is surprisingly in light of consumer confidence.

The pendulum of business confidence that swung badly against the Coalition government during its first year in office is coming back.

ANZ’s Business Outlook for September shows a bounce of 12 points to a net 38% of respondents reporting they expect general business conditions to deteriorate in the year ahead. This brings headline business confidence back to its highest level since May.

Firms’ perceptions of their own activity prospects lifted four points to a net 8% expecting an improvement, still well below the long-term average of +27%.

Expectations among retailers of their own prospects remain by far the least positive, dropping 11 points to -13%.

The services sector is the most optimistic sector, consistent with its large contribution to the 1.0% GDP growth over the June quarter.

ANZ chief economist Sharon Zollner says the retail sector’s pessimism is surprisingly in light of responses to the ANZ Consumer Confidence Survey, which comes out on Friday.

“[This] suggest households still believe it is a good time to spend,” she says.

An encouraging sign is that nearly all of the 15 activity indicators rebounded during the month, with only investment intentions deteriorating further.

“The growth signal coming out of the survey remains weak, certainly. But if the indicators continue to rebound, it will increase the odds that while the economy may have hit a pothole, the wheels are not falling off,” Ms Zollner says.

The lack of skilled labour remains the single biggest issue for businesses, though regulation has become the largest worry in the agricultural sector.

Other findings in the survey:
• A net 9% of firms are expecting to reduce investment, down 4 points. “This series is usually a fairly good indicator of near-term economic activity but was an outlier this month, in that most other indicators improved.”
• Employment intentions lifted 5 points to -1%.
• Profit expectations lifted 4 points to -13%. Retail is the weakest sector at -35% (down 8 points) while services bounced 9 points to -1%.
• A net 33% of businesses expect it to be tougher to get credit; little changed.
• Firms’ pricing intentions lifted 3 points to +30%. Inflation expectations were little changed at 2.1%.

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