Business Confidence Slumps - Sydney Morning Herald 8-7-08
Business confidence slumped in June to the lowest level since the September 11 terror attacks in the US, as rising inflation and a grim outlook for the global economy dash hopes of an upturn in business activity.
The National Australia Bank business confidence index shrank for the sixth consecutive month, contracting 5 index points to -9, down from May's -4 point reading. The drop in confidence hit most sectors except mining, and was pushed lower by weak retail activity. The result came in well below the zero level, under which the gauge gives a bearish assessement.
Confidence in the business sector is now at its lowest level since September 2001, when the index stood at -15.1.
"The slowdown underway gained further momentum in June - importantly, rising spare capacity and higher unemployment - with significant further slowing in prospect," Jeff Oughton, head of NAB economics, said in a statement. "Domestic credit expansion to both households and businesses has weakened significantly and global securities markets remain problematic for most corporate and bank borrowers."
For business owners and consumers alike, the forward looking gauge foreshadows another rough month ahead. But weaker confidence bolsters the view the Reserve Bank, currently holding the cash rate at a 12-year high of 7.25%, won't need to raise rates again to fight inflation. Inflation currently stands at 4.2%, above the 2%-3% range the RBA prefers.
