Tuesday, 9 October 2007

Aust business confidence falls again

Business confidence falls with rate rise
Business confidence has fallen for the fourth month in a row to reach its lowest level since the start of 2007 following a recent interest rate rise and financial market turbulence, a survey shows.

The National Australia Bank (NAB) monthly business survey of showed the business confidence index slipped three index points in September to seven, reaching its lowest level since January.

This was the fourth consecutive fall since the business confidence reading fell from a record high of 14 points in May.

The business conditions index fell three points in September to 16, with the mining, wholesale, transport and recreational industries all reporting falls.

The export sales index fell to minus three in September from zero as the Australian recovered in the month to test 18-year highs above 89 US cents.

The employment index fell four points to six in September as wages pressures eased.

The trading conditions index was steady at 26 in September while profitability was down two points to 18.

Whilst the survey showed a continued decline in business conditions, it is still at healthy levels. The Australian economy is set for calendar year GDP growth in excess of 4% for 2007. However the current trend is probably a good indication that we saw the peak in business conditions in the current business cycle back in May.

NAB's chief economist Alan Oster was on Bloomberg today talking about the latest survey results. He argued that the Australian economy, despite a lingering drought weighing on the farm sector will still grow at a healthy clip in 2008. However he did say that strong Australian growth was contingent on the Chinese economy continuing to expand at in excess of 10%. I wonder how long he thinks China can produce those kind of growth rates? Click on the picture for the Bloomberg interview.