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Business gets gloomier again, ending recent recovering trend

Thursday 28th February 2019

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Businesses became gloomier in February, belying expectations that firms were coming out of their funk, and various activity indicators also ticked down.

ANZ Bank’s headline business confidence index sank 7 points in the latest month with a net 31 percent of respondents expecting general business conditions to deteriorate in the year ahead.

Still, it’s better than the recent low back in August of a net 50 percent expecting general business conditions to worsen.

A net 11 percent of firms are still expecting their own businesses to improve but that’s down 3 points from the last survey in December.

The survey finds the agriculture and services sectors are the most optimistic and the construction industry the most pessimistic.

It shows a net 2 percent of businesses are expecting to lift investment, down 2 points, only a net 3 percent are expecting to employ more staff, down from 7 percent, and a net 11 percent are expecting profit to decline, down from a net 6 percent in December.

A net 38 percent of firms expect it will be harder to get credit and while a net 26 percent expect to raise their prices, inflation expectations eased from 2.15 percent to 2.06 percent.

Commercial construction companies’ intentions to build fell 6 points to 4 percent while residential construction companies’ intentions fell 29 point to 4 percent.

“This data is volatile but residential intentions are trending down while commercial intentions are back in the black after being negative in June to October last year,” ANZ says.

“Key activity indicators eased in February. It’s worthwhile taking a look at the data out of the services sub-sector, as this tends to be a less volatile part of the economy and so have tighter correlations to overall growth,” the bank says.

“If we don’t see a marked bounce-back soon, the investment intentions and capacity utilisation data imply downside risk to economic momentum ahead, even allowing for possible political impacts in the data.”

The Labour-led government was formed in October 2017 and business confidence immediately took a turn for the worse and has remained in negative territory ever since, even though the own activity measure, usually a more reliable indicator of actual GDP, has remained in positive territory.

(BusinessDesk)

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