Business gloom worst since recession: Economy roundup

Declining consumer sentiment, high fuel prices and the global credit squeeze have spooked business owners, sending business confidence to its lowest level since the early 90s.

Declining consumer sentiment, high fuel prices and the global credit squeeze have spooked business owners, sending business confidence to its lowest level since the early 1990s.

Business confidence fell four points to -8 in the June quarter, according to the NAB quarterly business survey, the lowest level since mid-1991.

And business conditions are not far behind, falling seven points to their lowest level since 2001 and leading NAB to judge that domestic demand is currently growing at just 2% to 2.5%.

Conditions were weakest in the retail, recreational and personal services sectors in the June quarter, while business services and mining performed best.

Business reported an overall decline in forward orders for the first time since 2001, while price pressures lifted 0.6% to an annual 2.1%.

Profits also fell to their lowest level since 2001, with weak consumer demand the biggest problem, while business capital expenditure plans were also down on the previous quarter.

“The combination of much tighter financial conditions, falling global equity markets and the global credit crunch has continued to undermine confidence and activity levels,” NAB chief economist Alan Oster says.

It’s been another ugly day on the sharemarket, with investors still concerned about the impact of the continuing credit crisis on local banks and financial services companies. Those fears were heightened overnight when the Dow Jones industrial average sank 239.61 points, or 2.11%, to 11,131.08 after US banking giant Merrill Lynch said it will take a $US5.7 billion third-quarter writedown as it sells risky debt, and raise $US8.5 billion by selling new stock.

All of Australia’s banks have fallen in morning trade, with Commonwealth Bank slumping 4.6% and the struggling NAB dropping 4.1%.

The benchmark S&P/ASX200 index fell 73.4 points or 1.5% to 4848.7 by 12.15pm AEST, after falling a total of 4.3% in the previous two sessions.