Login
ISCOVER
Business confidence has dropped while household spending continues to rise, research says.
NAB Monthly Business Survey Feb-23 revealed that business confidence has fallen back below zero in February, continuing “a recent period of volatility”.
The already fragile business confidence crumbled, according to Westpac senior economist Andrew Hanlan, which dropped by 10 points (pts) down to -4.
The survey found that this fall was driven primarily by wholesale, recreation & personal services, finance, business, and property. Confidence eased across all states but was still positive everywhere except for NSW and Queensland.
In addition, the Roy Morgan Business Confidence index was 95.8 in February 2023, down 10.6 pts since January following the Reserve Bank of Australia’s (RBA) ninth consecutive rate hike during the month.
According to Roy Morgan, the fall in business confidence for February reversed the increase of 10.4 pts in January, driven by rising “pessimism about prospects for the next 12 months” in both the performance of the Australian economy and personal prospects of the business.
Furthermore, views on the performance of the Australian economy over 2023 worsened with 59.3 per cent (a rise of 11.1 pts) of businesses expecting “bad times” while 39.1 per cent (down 10.2 pts) expected “good times”.
However, business conditions remained strong according to the NAB business survey, showing little change in the elevated levels of “key subcomponents” such as trading conditions and employment.
The survey revealed that business conditions fell slightly by 1 pt to +17 index points for February, maintaining a strong level in the history of this survey.
NAB chief economist Alan Oster said: “In broad terms, consumer-facing sectors like retail and personal services are reporting conditions clustered around +20 index points, while business-facing sectors are clustered around a level of +10, which is also fairly strong.”
CreditorWatch chief economist Anneke Thompson stated that the survey results both suggest that businesses will face slowing demand moving forward, particularly smaller businesses providing discretionary goods or services.
Household spending on the rise
Despite the drop in business confidence, the latest Australian Bureau of Statistics (ABS) household spending indicator data for January 2023 has revealed that household spending rose 17.8 per cent in January when compared to the same period last year.
According to ABS head of business indicators, Robert Ewing, the increases were led by spending on transport, which rose 41.5 per cent; hotels, cafes, and restaurants (up 38.5 per cent); and clothing and footwear (20.9 per cent).
In comparison to pre-pandemic data from January 2020, spending on services increased 13.8 per cent and goods spending rose 23.7 per cent.
“Spending on services recorded a 28.2 per cent through-the-year increase in January 2023, which was stronger than the 8.6 per cent rise in goods spending,” Mr Ewing said.
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
“This can be credited to the post-COVID-19 recovery in spending categories such as transport, hotels, cafes and restaurants and recreation and culture.
“Spending on these services was more affected by COVID-19 restrictions, and 2022 has seen a recovery to a more normal share of total spending. From the low point in April 2020, spending on services has risen 145.5 per cent compared to 35.8 per cent for goods.”
[RELATED: Home buyer sentiment at 34-year low as spending rises]
JOIN THE DISCUSSION