Stronger conditions for ASX 300 in Q2 – widening the gap to the economy – but confidence fell sharply. Mining conditions fell, now the weakest among ASX 300 firms. Discounting among ASX 300 may be evident. Stocks & orders point to weakness in domestic economy.

• ASX 300 firms recorded a slight improvement in business conditions in June, up to +2 points, while trends in NAB’s Quarterly Business Survey (QBS) deteriorated a little further – down to -2 points. The improvement in conditions for the ASX 300 was driven by gains in the Transport, Utilities & Communications sector and Manufacturing. There was a decline in conditions for Mining – which recorded the weakest conditions overall, highlighting the transition in the sector over recent quarters.
• Counter to the trends for conditions, business confidence weakened across the economy – with ASX 300 confidence trending in line with the broader economy over the past three quarters. Mining, Finance, Business & Property Services and Construction contributed to this decline.
• The relative softness in the domestic economy remains evident in the measures of sales margins, forward orders and stocks – with each of these measures deteriorating further in the ASX 300 survey than the QBS.
• Cost trends generally worsened for the ASX 300 in the June quarter – with stronger growth in labour costs, and both purchase costs and overheads increasing, while final product prices deteriorated further.
• Capacity utilisation was up for the ASX 300 in Q2, but investment fell sharply – with the capital expenditure measure weaker than that of the broader economy. Manufacturing, the Finance, Business & Property Services sector and Mining contributed most to this decline.
• Cashflows for the ASX 300 were considerably stronger than the broader economy – remaining at +18 points, while conditions in the QBS deteriorated, down to +4 points from +7 points in March.
• While demand was seen as the main constraint for profitability among ASX 300 firms, it was seen as less of an issue for output. These divergent trends may be consistent with further discounting among these firms.

For further analysis download the full report:

• ASX 300 Quarterly Business Survey – June 2013 (PDF 143 KB)