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Business sentiment on verge of nasty turn

Business sentiment on verge of nasty turn

Business sentiment has been shaken in the past few months, and is now teetering on the edge of turning negative, according to a recent survey.

The CEO Institute's Business Confidence Index fell sharply for the three months to August, with the score sinking from 30 to 3. A number below zero would represent a negative outlook.

The August report states that it is “quite possible that sentiment will turn negative in the next quarter.”

CEOs are by far the most negative in their opinions about the economy, with this indicator scoring a -39 index score, from a maximum value of 100 and a minimum of -100.

The Institute attributes the poor score to concerns about the international economy, coupled with doubts about domestic political leadership.

Respondents were more confident in prospects for increasing investment, employment and sales at their own business, although few expect this to translate to profit growth.

A closer look also shows that the depressed confidence is having a definite impact on investment and hiring decisions, the Institute said.

The amount of respondents indicating that they were neither likely or unlikely to hire in the next three months grew three percentage points during the quarter to 43%. For investments, this percentage grew to 62%, up from 51% a quarter earlier.

Larger companies - those with a turnover of over $100 million - are in general less confident about prospects for the economy, profits and sales than smaller entities.

Broken down by region, the Institute said the results show “little evidence of the 'two-speed economy', with Queensland and Western Australia being only marginally more positive than Victoria and New South Wales.”

But it adds that businesses appear to be facing more competition in the latter two states.

Slow consumer spending is expected to take its toll on growth going forward, with 13% of respondents stating that they expect this to be the biggest factor to impact their business in the next three months.

The lion's share of 12% of respondents meanwhile indicated that international factors had made the biggest impact in the past quarter.

“Businesses seem to have been surprised by the consumer 'strike' and ambushed by the deterioration of the international environment,” the report states.

International factors causing ongoing concerns included exchange rates, share market weakness and worries over the encroachment of a possible “second GFC.”

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Tags business confidenceresearchCEO Instituteconsumer confidenceeconomic indicators

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