Business Confidence Up For 5 Months In A Row

Business Confidence in December rose marginally to 117.2 from 115.7 in November. Confidence amongst businesses in Australia has now increased for the fifth consecutive month making it well above the low point of 99.8 recorded in July 2011. This improvement was in spite of global economic uncertainty and very volatile share markets. The recent drop in interest rates probably assisted the improvement.

These are the latest findings from the Roy Morgan Monthly Business Confidence Survey conducted amongst a sample of 1821 businesses across Australia in December 2011.

The Roy Morgan Business Confidence Rating stood at 128.2 in April 2011, immediately prior to the decline in the ASX. The confidence rating continued to slide down to 99.8 in July before showing marginal but consistent improvements since then.

Chart 1: Roy Morgan Business Confidence Rating

Source: Roy Morgan Business Survey, Dec 10 – Dec 11, average monthly sample Dec10 – Dec 2011, n=1511.

The major reason for the lift in confidence from July through to December 2011 has been a big increase in the proportion of businesses considering that “Australia will have good economic conditions in the next 12 months”. Currently 59% consider that conditions will be good, compared to only 43% in July 2011.

Chart 2 shows the dramatic swing to a positive balance of opinion regarding the likely economic conditions over the 12 months compared to July 2011 when the balance was very negative.

Chart 2: Positive Outlook for the Australian Economy Next 12 months

Source: Roy Morgan Business Survey, Dec 10 – Dec 11, average monthly sample Dec10 – Dec 2011, n=1511.

This positive economic outlook is impacting favourably on investment decisions by businesses with 57% now considering the next 12 months as a “good time to invest in growing the business”, compared to only 49% in July 2011.

Norman Morris, Industry Communications Director, Roy Morgan Research, says:

“Although business confidence has risen over the last five months, not all states and industries have the same level of optimism. Western Australia and Victorian businesses have the highest level of confidence, whereas South Australia, Tasmania, and Queensland are below average.

“The most positive industry outlook comes from Mining and Finance, whilst the least optimistic are Wholesale Trade, Construction, Manufacturing, Retail and Agriculture. Figures just out for 2011 show a record number of insolvencies in Construction and Retail which support the negative feelings in these industries, as does the drop in job vacancies in Retail and Manufacturing in contrast to the increase in job vacancies in Mining.

“Although businesses are seeing the next 12 months as potentially a good time to invest, only 17% actually say they plan to do so. This reflects the uncertainty in the current economic climate. The biggest influence on how businesses view their prospects over the next 12 months is how they expect the economy in general will perform rather than specific financial issues such as availability of finance and interest rates.”

Survey Summary: Results for monthly Roy Morgan Business Confidence Rating for the component questions

Source: Roy Morgan Business Survey, Dec 10 – Dec 11.

Purchase the Roy Morgan Business Confidence – Monthly Detailed Report in Australia.

About Roy Morgan Business Single Source Survey:

The Roy Morgan Research Business Survey began in May 2010 and currently conducts more than 2000 interviews per month to measure Business Confidence. Around 1100 of these interviews also cover all aspects of Business Finance with the remainder covering Telecommunications.