Business confidence falling: NAB and D&B surveys

Worsening business conditions and fears about the impact of high interest rates are undermining the confidence of business owners, according to two new surveys released today.

The National Australia Bank business expectations survey found that business confidence declined in March, to reach lows not seen since September 2001.

The prevailing mood among business owners is now one of pessimism, with the NAB Business Confidence index falling two points to be -4, the second consecutive month below the zero point separating positive from negative sentiment.

Business owners reported a general decline in conditions last month, with trading activity, profitability and margins on retail sales all falling.

Business in the recreational and personal services and manufacturing sectors reported by far the biggest downturn in conditions in March, with resources businesses the only ones to report a generally positive environment.

And business executives expect sales prices to fall to their lowest levels in 18 months in the June 2008 quarter, according to the Dun & Bradstreet National Business Expectations survey.

Just over 70% of business executives now expect a tightening of credit will have a negative impact on operations in the coming quarter, up 15% on D&B’s previous survey.

Although tough news for business owners, the results suggest the Reserve Bank of Australia may finally be making some headway in its battle against inflation.

“Businesses are now operating in an environment where cash is of paramount importance yet they are being forced to deal with tighter lending standards and business payments that are more than three weeks overdue,” D&B chief executive Christine Christian says.