Business conditions for ASX 300 continue to slide in NAB survey

Business conditions for the ASX 300 have continued to fall, spurred by a decline in the manufacturing industry, according to the latest figures released by NAB.

The quarterly survey of the ASX’s top 300 listed companies shows confidence among larger companies has now reached negative territory, and is now weaker than average.

The survey shows conditions fell by six points to a positive balance of three points, with manufacturing leading the way. Conditions in that industry were “quite negative”, although across the board conditions remained flat at 10 points.

However, there is some hope, with NAB noting that confidence over the next 12 months remains strong, “with conditions tipped to improve over the period”, although it notes forward forecasts should always be viewed with bias.

Confidence has continued to fall into negative territory with both ASX 300 firms and the broader economy now more pessimistic about the economy outlook. Queensland and Western Australia were the strongest states, with Tasmania and New South Wales recording the weakest confidence.

Larger firms recorded a net balance of negative 2.5 points, while firms in the larger economy saw confidence fall from three points to negative one.

“In contrast to business conditions, manufacturing had less impact on the declines in business confidence in quarter three, with the fall in confidence only slightly more muted when the sector was excluded.”

In a shift that shows how the global economic environment is now weighing down on expectations, the ASX 300 and the broader economy “have significantly altered their interest rate expectations”.

“Over the next 12 months, a net balance of 23% and 20% of firms in the ASX 300 and QBS anticipate lower interest rates,” the survey found.

“On average, ASX 300 firms anticipate a cut of around 0.21%, while the QBS records cuts of 0.13%.”

A number of individual results in the survey were “quite divergent”, it found, when compared with June. Profitability has improved and trading conditions are unchanged, but there has been a decline in employment conditions, particularly in manufacturing.

The sales margins of respondents are largely unchanged, with an improvement expected over the next three months.

Forward orders improved among the ASX 300, while trends in stock levels have softened.

Overall, lower demand has been listed as the most key constraint for output and profits, with 60% of firms noting that sales and orders are a key constraint to output.

“The availability of suitable labour also remains a critical issue for output in both surveys, with over 40% of firms in our surveys facing difficulties in sourcing skilled workers.”