Business confidence dips as market volatility rolls on: Economy roundup

A key measure of business confidence has dipped for the second consecutive month as the Australian sharemarket continues to take investors on a roller-coaster ride today.

In its first hour of trading, the S&P/ASX200 fell by more than 100 points, then promptly regained another 60. By midday it had returned to a negative trend and was down 1% on Friday’s close to 5801.7.

US markets performed relatively well overnight – thanks largely to lingering hopes that the US Federal Reserve will cut rates yet again when it meets tonight – with the Dow Jones Index closing up 1.45% to 12,383.89.

Evidence emerged today that the market volatility is having a clear impact on business confidence, with the NAB monthly business survey’s measure of business sentiment falling for its second consecutive month.

In December 2007 – the month after the sub-prime driven market wobbles began in earnest – business confidence fell one point to float just five points above the line separating negative from positive confidence; its lowest level since late 2006.

By contrast, respondents to the NAB survey reported that business conditions remain very good, with improved mining, wholesale and retail conditions the key determinants.

Bad news continues to come in on the inflation front however, with wage growth staying at a very high annual rate of 5.2% and retail price inflation reaching 2.7% for the month.


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