Australia’s business conditions and sentiment deteriorate in October

Businesses in Australia have recorded certain drop in both current conditions and sentiment in the month of October. The deterioration was broad-based throughout states and industries. In the month, business conditions declined in October and are at the lowest level recorded in one-and-a-half years. Even if the headline index continues to be at decent levels, the details recorded subdued figures.

The employment index fell for the fifth continuous month, almost reversing the gains seen in the past nine months, while capacity utilization continued to decline. Profitability also came in subdued. It tends to be a good lead indicator for both hiring and business investment. In all, these indices appear to imply further slowdown in employment growth in the months ahead, said ANZ in a research note.

The drop in conditions was broad based throughout industries and states. Conditions in New South Wales continued to decelerate, which is in line with other indicators that imply that the New South Wales state has lost momentum and that the economic growth is returning closer to trend, added ANZ. In the meantime, conditions in Victoria have also fallen following strong growth in September. However, levels in both states continue to be elevated and in line with the current economic rebound.

“At this stage, we don’t think this moderation in business confidence is pointing to a significant slowdown in the economy, but we will be closely monitoring future developments”, added ANZ.