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After spiking in January, business conditions deteriorated slightly in February, however remain at solid levels consistent with ANZ’s view that the business sector has begun 2017 with some positive momentum behind it.
According to the latest Quick Reaction by ANZ, business conditions eased back from +16.2 in January to +9.3 in February. However, despite the decline, the bank emphasised that conditions remain at solid levels.
"Levels of business conditions continue to indicate solid levels of activity, and the details of the report support this view. Most notably, the profitability index remains consistent with strong growth in employment, while the measure of capacity utilisation suggests some downside risks to the unemployment rate in the near term," ANZ said.
"The details of the report were quite positive, suggesting that the business sector remains on a solid footing, with labour market indicators supportive of ongoing improvement in the unemployment rate."
The bank pointed out that business conditions remain quite varied across industries. Conditions in the mining sector have recently improved on the back of stronger commodity prices, and have returned to their long-run average.
Similarly, conditions in the construction, manufacturing and wholesale industries are also above average.
Meanwhile, the retail sector continues to struggle amid ongoing strong competition and margin pressure, although conditions have picked up slightly over recent months.
Business confidence also edged down in February, alongside a further deterioration in the Federal government’s standing in public opinion polling.
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