Business conditions remain at four year lows, while low interest rates and the falling Australian dollar have failed to boost business confidence.
Business conditions in July remained at their weakest level since May 2009 at -7, with better trading and employment conditions weighed down by deteriorating profitability, the National Australia Bank monthly business survey said.
Business confidence fell to its lowest point since November last year, down to -3 from 0 in June.
NAB said the weakness in business activity and profitability was likely the key driver of weaker confidence.
Uncertainty over the timing of the federal election, which had not been called when the survey was conducted, possibly kept businesses wary as well, NAB said.
The survey said solid improvements in business conditions in retail, mining, recreation and personal services were offset by weaker conditions in finance, business, property, construction and transport.
“The still weak set of industry conditions suggests the lower Australian dollar is providing little support to activity domestically,” NAB said.
“Forward looking indicators of activity suggest little near-term revival in business conditions, with forward orders, employment conditions, stocks and capacity utilisation all remaining well below long-run average levels.”
The survey said confidence remained lacklustre in mining as businesses seemed pessimistic about future investment, given slowing global demand and softening commodity prices.
Confidence among construction firms and manufacturers was also waning.
“Not even a falling dollar has been able to revive hopes for manufacturers,” NAB said.
“The only sectors to report better confidence were in retail and wholesale, where conditions improved in July and the prospect of lower rates may be helping.”
NAB economists said they forecast a softening of gross domestic product growth to 2.2 per cent in 2013 as well as a significant deterioration in the labour market.
“When combined with still-low inflation, we expect another Reserve Bank cut, probably in November, and more cuts may follow,” they said.
AAP
