Business conditions are now at the weakest seen in three years, with mining and construction down sharply, according to today’s NAB Monthly Business Survey.
The survey found business confidence deteriorated sharply in May, with businesses now expecting weaker near-term activity, despite a 50 basis point rate cut early in May and 100 basis points of cuts over the six months to May.
Businesses appear to have been concerned about euro zone and global growth issues.
The Federal Government budget was viewed very unfavourably by businesses.
The survey found the deterioration in activity was broad-based across industries, trading profits and, especially, employment.
The significant deterioration in employment and a lagging indicator of demand suggests the weakness in activity has begun to bite and employers are preparing for a more subdued outlook as forward orders and stocks trend lower, and capacity utilisation remains worryingly low.
Overall, the survey implies underlying demand growth in the June quarter may slow to around 3%, while gross domestic product growth may slow to around 2%.
West Australian businesses still without power
Nearly 20,000 homes and businesses in Western Australia are still without power and may not be connected for days.
The state has suffered major storms over the past few days, disrupting electricity coverage. Thirty schools have already been shut until power comes back on.
State-owned utility provider Western Power has worked to connect more than 150,000 customers back to the grid, but the state’s key business groups have already lamented the effects the blackout will have on its members.
An outage payment scheme is available, and eligible customers can claim up to $80 in compensation.
While a total figure for expected compensation payments is still being calculated, some analysts believe it could run into the tens of millions of dollars.
WA Chamber of Commerce and Industry chief executive James Pearson said businesses would have experienced “significant disruption and costs”.
Commercial finance rises during April
The number of commercial finance commitments rose during April along with personal lending, according to the latest figures from the Australian Bureau of Statistics.
The number of total business finance commitments rose by a seasonally adjusted 9.8% to $35.339 billion, compared to the upwardly revised $32.191 billion in March.
According to the figures, personal lending rose 0.6% to $7.299 billion, up against the upwardly revised $7.252 billion.
Echo placed in trading halt
Echo Entertainment Group has been placed in a trading halt ahead of an announcement regarding a capital raising.
The company will remain in the halt until the announcement, or trade resumes in June 18.
The company is reportedly planning the move to keep away potential takeovers from Crown and Genting. According to the Australian Financial
Review, the company has hired Macquarie Bank and UBS to run the raising.
Stock market higher
Following the public holiday yesterday the Australian stock market opened higher despite falls in US stocks overnight after initial optimism on Spain’s bailout fizzled.
At the market opening, the benchmark S&P/ASX 200 index gained 0.35% lower to 4,078.3 points, while the broader All Ordinaries Index rose 0.32% to 4,124.7 points.