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Business confidence weakens in October – lowest since June

Source: Business Confidence, Roy Morgan Business Single Source (Australia), December 2010 – October 2014, Approximate Average Monthly Sample last 12 months, n=1,320.

Roy Morgan Research’s Business Confidence survey in October 2014 declined by 8 points (down 6.5%) from September (to 114.9), the lowest level since June 2014 and below the four year average.

Business confidence is now 21.4 points (15.7%) below the peak of 136.3 in October 2013 following the election of the Coalition Government and as a result it is back to around pre-election levels. These October figures are the result of 1,052 interviews with all types of businesses across Australia.

The decline in business confidence was across all components of the confidence index but was focused mainly on a more pessimistic outlook for the Australian economy and their own businesses over the next 12 months.

Monthly Business Confidence - Australia

business confidence october 2014

Source: Business Confidence, Roy Morgan Business Single Source (Australia), December 2010 – October 2014, Approximate Average Monthly Sample last 12 months, n=1,320.

Norman Morris, Industry Communications Director, Roy Morgan Research, says:

“The decline in business confidence in October was due largely to a big drop in the feeling that the next 12 months would be positive for the Australian economy and as a result it would not be a good time to invest in business expansion. Economic growth depends to a large extent on increased business investment and in October the proportion of businesses considering that the next 12 months would be a good time to invest in growing their business declined to only 52%, well down on September (61%) and below the pre-federal election level seen in July (55%) and August (56%) 2013.

“As would be expected from this loss of confidence, the proportion of businesses now feeling that they will be better off financially in the next 12 months has fallen to only 33%, well down on the 47% level seen in January this year.

“Confidence in the key areas of retail, construction and manufacturing, which were seen as making up for a slowdown in the mining industry, remained subdued although the construction industry is showing some tentative signs of an improvement in outlook.

“The RBA statement on the economy during the month was also fairly cautious and although expecting moderate growth, the decline in investment in the mining sector was seen as an issue with the potential to negatively impact on growth to place it a little below trend.

“Unemployment (Roy Morgan Unemployment - 9.1%, 1.09 million and Under-employment - 9.3%, 1.12 million)  remains a major problem and doubt created by the highly publicised ABS data revisions during the month is likely to have created further uncertainty in the business community about the real state of the economy.

“Although business has shown a decline in confidence during the month, it is now almost identical to the level of the ANZ-Roy Morgan Consumer Confidence index that finished the month on 114.6 compared to business with 114.9. The movements in both the business and consumer confidence are likely to remain volatile with recent world social, political and economic events being likely to impact at anytime.

“A challenge for banks when lending to business, particularly if demand is reduced, will be to improve their dealings with customers as shown by Roy Morgan Business Bank Satisfaction, which is currently well below the satisfaction level of the banks’ personal customers.”

For comments or more information please contact:
Suela Qemal, General Manager - Financial Services & Consulting
Office: +61 (3) 9629 6888
Suela.Qemal@roymorgan.com


About Roy Morgan

Roy Morgan is the largest independent Australian research company, with offices throughout Australia, as well as in Indonesia, the United States and the United Kingdom. A full service research organisation specialising in omnibus and syndicated data, Roy Morgan has over 70 years’ experience in collecting objective, independent information on consumers.

Margin of Error

The margin of error to be allowed for in any estimate depends mainly on the number of interviews on which it is based. Margin of error gives indications of the likely range within which estimates would be 95% likely to fall, expressed as the number of percentage points above or below the actual estimate. Allowance for design effects (such as stratification and weighting) should be made as appropriate.

Sample Size

Percentage Estimate

40%-60%

25% or 75%

10% or 90%

5% or 95%

1,000

±3.0

±2.7

±1.9

±1.3

5,000

±1.4

±1.2

±0.8

±0.6

7,500

±1.1

±1.0

±0.7

±0.5

10,000

±1.0

±0.9

±0.6

±0.4

20,000

±0.7

±0.6

±0.4

±0.3

50,000

±0.4

±0.4

±0.3

±0.2