WA business confidence rolls downhill

The WA Chamber of Commerce has released it quarterly survey of members today and it shows sentiment rolling steadily downhill:

Business confidence in the WA economy has softened further according to the latest Westpac – CCI Survey of Business Expectations.

The June quarter survey showed that 46 per cent of respondents expect conditions to deteriorate over the next 12 months, compared to just 15 per cent that expect conditions to improve. Thirty-one per cent also expect that the local economy will deteriorate within the next three months.

Sentiment continues to be weighed down by the difficult operating environment, with trading conditions and exports declining during the quarter, and other indicators remaining in negative territory.

“While business confidence has been low for some time now, the results this quarter reinforce the challenging environment being faced by businesses as we transition away from resources-led investment,” said CCI Chief Economist, John Nicolaou.

The difficult conditions have seen businesses scale back their operations further this quarter. Capacity utilisation fell to 72 per cent in June, and is now well below the long-term average of 80 per cent.

In a similar vein, fewer businesses are now looking to invest in capital equipment or in expanding their workforce in the year ahead. Only 15 per cent of respondents intend to invest in machinery and equipment this quarter, down from 20 per cent last quarter. Businesses are also holding back on hiring more workers, with only 16 per cent of respondents adding to their workforce this quarter, and 28 per cent laying-off staff.

With demand for labour softening, this has seen a substantial improvement in labour availability. Only eight per cent of businesses found it difficult to source workers this quarter – the lowest level in 20 years – and well down on the 75 per cent that found labour to be scarce at the height of the resources investment boom prior to the GFC.

“Labour market conditions are now clearly the softest they have been for a number of years,” said CCI Chief Economist, John Nicolaou.

“While there are still some areas of the economy experiencing difficulties, overall, the softer conditions have meant that businesses now have a much wider pool of candidates to choose from when filling vacancies. This will come as a relief for many businesses that have struggled to attract high quality candidates, which has contributed to higher labour costs,” Mr Nicolaou said.

This quarter’s feature question also asked whether respondents intended to increase their staffing levels and what their workforce demands were over the coming year.

Almost two thirds of respondents (65 per cent) do not intend to increase recruitment activity this year, with a challenging operating environment, poor trading conditions and high labour costs impacting on employment intentions.

Skilled workers were the most in demand with 73 per cent ranking this group in their top three labour requirements. This was followed by temporary and casual staff and mature aged workers.

In line with improved labour availability, wage pressures have eased, with 23 per cent of respondents reporting an increase in staffing costs, down from 30 per cent of respondents last quarter.

The cost of materials and supplies has also eased, but remains at a high level. More than one third of businesses reported an increase in input costs this quarter.

“Cost pressures continue to impact operations with input costs like rents, energy and materials, all adding to the cost of doing business and impacting on the bottom line,” said CCI Chief Economist, John Nicolaou.

“There is a clear need to address the cost of doing business in the state as a way of restoring confidence. Governments at all levels can play a role by reducing the regulatory burden and making sensible industrial relations reforms that will free up businesses to grow, increase competitiveness and employ more people,” Mr Nicolaou concluded.

New lows are acomin’.