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Reality check

Today’s fall in business confidence will hardly come as a surprise to economists and business commentators – the extraordinary surge in business confidence always had a too-good-to-be-true feel about it. It should be pointed out that the drop is hardly huge – business confidence fell 4 points to be at +14 points in September and […]
James Thomson
James Thomson

Today’s fall in business confidence will hardly come as a surprise to economists and business commentators – the extraordinary surge in business confidence always had a too-good-to-be-true feel about it.

It should be pointed out that the drop is hardly huge – business confidence fell 4 points to be at +14 points in September and is still above the long-term average.

However, it must be noted that the survey was taken before last week’s rate rise – presumably that may have knocked business confidence around even more.

But as the drop in business conditions shows – the measure of sales was down 4 points to +8 points and profitability was down 7 points to +4 points – there is a big difference between positive thoughts and actual sales coming in the door.

The recovery is clearly at different stages in individual sectors. Manufacturing, finance and mining did well in terms of actual conditions, but wholesale and transport fell heavily. Conditions in construction fell moderately and the retail sector was flat.

NAB’s chief economist Alan Oster says the softness in “cyclical sectors” indicates the Government’s stimulus boost is now starting to fade.

What’s the message for entrepreneurs? Tread carefully, and pick your target markets.

Those sectors that are leveraged during the global recovery appear to be doing quite well, while domestic sectors such as wholesale and, to a lesser extent, retail, are still under pressure. On a state-by-state basis, Victoria seems to be the state where activity is on the rise most sharply.

There are some great signs out there, including strengthening forward orders and the labour market.

But canny entrepreneurs need to remain flexible during the early stages of the recovery, pick the right targets and stick close to important customers.