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Business confidence improved in October but remains mired in gloom

Thursday 31st October 2019

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Business confidence improved in October but remains deeply negative and firms' optimism about their own activity continues to fall.

A net 42.4 percent of the 412 respondents surveyed by ANZ Bank expect general business conditions will deteriorate during the coming year, down from 53.5 percent in September. 

However, firms' optimism about their own activity also fell, with a net 3.5 percent now expecting things to get worse, compared with the net 1.8 percent who were negative in the September survey. It was the fifth fall in a row and the lowest since April 2009. However, it was well above the recession low of negative 21 percent, ANZ Bank said. 

ANZ chief economist Sharon Zollner said the data was a mixed bag but "it appears that the activity indicators are generally finding a floor, in that we saw a mix of rises and falls across the other activity questions. She noted employment intentions were down but investment intentions were up.

Employment intentions improved by 1.6 points to a net 9.4 percent now expecting to reduce head count.

Investment intentions, however, improved 3.4 points to a net 5.5 percent expecting to reduce investment. Profit expectations improved by 3.3 points to a net 21.2 percent expecting profitability to decline.

Pricing intentions, meanwhile, rose 5.6 points to a net 23.6 percent of firms expecting to raise prices. Cost pressures rose 1.1 points to 48.4 percent expecting higher costs but inflation expectations were largely unchanged at 1.62 percent. 

The retail sector remains the most downbeat with the weakest own activity, profits and employment readings and the highest expected cost pressure.  

Zollner noted, however, things seem to be looking up for the construction sector although firms still expect to cut staff. 

"All up, we’d take the mixed signals out of this month’s survey as a positive sign, as it interrupts a deteriorating trend. It’s a start," said Zollner.


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