ASX 300 Quarterly Business Survey – December 2014

Big business in Australia is losing confidence, affecting medium-term growth and capital expenditure plans. Overall confidence among larger firms has now fallen below its long-term average and is weaker than for smaller companies and the broader economy.

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Big business in Australia is losing confidence, affecting medium-term growth and capital expenditure plans. Overall confidence among larger firms has now fallen below its long-term average and is weaker than for smaller companies and the broader economy.

Business confidence among ASX300 firms fell 13 points to -3 in Q4’14 and now stands at its weakest level since Q4’12.

NAB Group Chief Economist Alan Oster said: “The decline was driven by large mining firms, with overall confidence weakest in mining and construction by some margin.”

Confidence deteriorated across all other sectors, except Wholesale where they were a touch higher.

Business conditions also moderated, with the index falling -3 to +8 points in Q4’14.

Although business conditions deteriorated, they are still overall positive, above their long-term average and stronger than the broader economy.

“Weaker business conditions reflected a drop in profitability and slightly weaker trading conditions, which offset stronger, albeit negative, employment conditions” said Mr Oster.

Mirroring the results from NAB’s broader business survey, business conditions continue to show a patchwork economy.

According to Mr Oster: “Large falls in the mining and transport sectors offset solid gains in recreation and retail, while big construction firms continued to report the weakest conditions overall, possibly reflecting the pullback in mining-related construction.”

Forward orders among the larger firms deteriorated for the second consecutive quarter (and was weakest for construction), which may also indicate subdued domestic demand over the next few months.

On a brighter note, the falling dollar appears to be providing momentum for higher export sales and export orders, which may be why ASX 300 firms (especially large manufacturing) have increased their stock levels.

“Importantly, for the first time since the Survey began in early-2011, we have been able to seasonally adjust the results. This provides a clearer picture of how big business is performing as it adjusts for normal seasonal changes by industry” said Mr Oster.

 For further analysis download the full report.