The Australian Chamber of Commerce and Industry (ACCI) today released its Survey of Investor Confidence for the December quarter of 2013, which suggests that a modest improvement in business conditions will not be enough to stop Australia’s unemployment rate from rising over 2014. Investment intentions also remains stuck in the mud:
The January 2014 ACCI Survey of Investor Confidence reveals that despite some positive trends, such as sales and profitability continuing to rise off of a low base through the December quarter, sustained improvements are needed. Unless conditions improve further from their current levels, business capacity will remain underutilised and investment and hiring intentions will remain lacklustre.
The index of Expected Number of Full Time Employees, remained in negative territory, but edged up marginally to 47.4 points. This figure indicates firms anticipate reducing levels of full-time employment and suggests that overall unemployment will continue to rise…
The index of Own Sales – Current, which measures businesses sales in their own firms over the quarter, is approaching positive territory for the first time since January 2011. However, the index is still just below the 50 mark that separates contraction from expansion indicating business sales performance remains weak. Likewise, Own Profitability – Current remains in negative territory, and has done so since the global financial crisis…
Investment remains mired in contraction territory with the index of Expected Level of Investment demonstrating that investment growth is not widely planned amongst businesses. This is unsurprising given the assessment that the current climate for investment is poor, and both actual sales and profits have disappointed compared to expectations six months earlier.
The ACCI’s chief economist, Burchell Wilson, explained the poor result as follows:
“The survey shows businesses are still struggling and have limited appetite to invest or employ. The most disappointing element of the survey was the pronounced slump in expectations for firm’s own performance seen in the December quarter. The size of dip in the seasonally adjusted expectations indicators suggests that firms are losing hope and may signal a turning point that could see firm level expectations sink into negative territory in coming quarters.
“There is little evidence in this survey that provides comfort for the view that the anticipated recovery in non-mining investment will be sufficient to offset the drag on growth from the resources sector in the year ahead. Businesses are judging that it is not a good time to expand capacity and expect there to be further pressure to reduce the size of their workforces. Combined with the disappointing labour market figures for December, the case for a further interest rate cut is growing. The inflation report for the December quarter due on Wednesday is expected to show price pressures are well contained and is unlikely to present an obstacle to reducing the cash rate further.
The full report is available here.
