Business confidence rose sharply for ASX 300 firms in the June quarter (back to levels seen elsewhere in the economy) although conditions were broadly unchanged.

Capital expenditure also gained momentum (from +1 to +21 points), but mining remains depressed. Cap ex now stands at its strongest level since Q1 2012, driven by large gains in finance and property. However, somewhat surprisingly longer term capital expenditure expectations remain subdued, notwithstanding a massive surge in construction expectations.

Business confidence among Australia’s top listed firms rebounded in the June quarter after two consecutive quarters of being in the red, increasing +11 points to a final reading of +7.

According to NAB Group Chief Economist Alan Oster, “confidence increased across all industries, although manufacturing, transport and utilities remain negative. Recreational services remain the most confident, followed by retail, with construction improving most”.

Overall ASX 300 business conditions were broadly unchanged at +7 (from +6 in the March quarter), despite the large improvement in trading conditions.

According to Mr. Oster, “trading conditions rose to +20 from +13 in the previous quarter, reaching a new survey high”.
However, profitability remains lacklustre shedding half of its Q1 2015 value (to +6 from +13 previously) and is now at its weakest level since Q3 2013.

“Despite the decrease in cost pressures and an increase in final product prices, profitability weakened due to ongoing negative sales margins (albeit improving slightly over the quarter)” said Mr. Oster.

Employment was largely unchanged at -6 (from -7 previously).

Mining related cap-ex improved marginally over the quarter although remains at negative levels. This compares to non-mining cap-ex which bounced back to +31 index points (from +17 in the previous quarter).

“Looking ahead, while non-mining cap ex intentions remain modest over the next twelve months, large construction firms plan to ramp up their business investment” added Mr. Oster.

Meanwhile, forward orders fell slightly, stock levels and export sales increased, while export orders remained broadly unchanged.

For further analysis download the full report.

ASX300 Quarterly Business Survey – June 2015