Business sentiment holds near eight-year high but purse strings tighten as consumer confidence falls
Thursday, 14 March 2019
Business confidence in South Australia remains strong, holding at a near eight-year high level, according to the latest BankSA State Monitor released today.
Conducted by an independent research firm, the latest BankSA State Monitor shows that while the overall business confidence index adjusted slightly, from 119.0 to 118.1, it remains at a high level for the third consecutive survey.
In particular, local business owners and managers reported greater optimism about their own business situation, and a perception that small business activity is picking up in South Australia.
Businesses are, however, indicating they’ll take a ‘wait and see’ approach in some areas, with reduced intention to create additional employment in the immediate future, and less confidence about whether the climate for doing business would continue to improve over the coming 12 months.
BankSA Chief Executive, Nick Reade, said these results indicate that while businesses remain confident, they are entering 2019 with a little more caution.
“It’s pleasing to see business confidence holding strong, and this is an important indicator for economic activity and growth in the state,” said Mr Reade, “but we need to actively facilitate the right conditions to ensure this will continue.”
“While it is encouraging to see confidence remaining at a relatively high mark, businesses are holding back spending on major purchases, so the challenge now is to translate this optimism into greater investment in their businesses and more employment, which will in turn support a much-needed boost in consumer confidence.”
The survey shows that South Australian consumers are pulling back on spending as confidence softens for the second consecutive survey, reducing 4.4 points from 106.3 to 101.9. This has led to a fall in major consumer purchases, including real estate, cars, whitegoods and holiday travel.
The decline in consumer spending in recent months, including over the Christmas period, is compounded by lower intention amongst consumers to spend in the immediate future also, with nearly one in two South Australians stating they will not make a major purchase in the coming three months either.
South Australian consumers reported reduced sentiment about their own household situation and less confidence that their financial position will improve in the next 12 months.
“This is the fifth consecutive survey that has seen consumer confidence trail business confidence,” said Mr Reade.
“This is being largely driven by consumers’ own household financial position which is translating to less spending, particularly on major purchases, with relatively static income but increasing costs of living having an impact (such as essential services, insurance, petrol).
“This is likely to be unwelcome news for retailers, which was the sector most ‘worried’ about a downturn in turnover (49 per cent) this survey.
“It was encouraging to see an improvement in consumer confidence this survey about the ability to find other suitable work should they, or someone in their household, need to change jobs.”
Other key findings from the latest BankSA State Monitor include:
- Consumers aged 18-24 reported the largest fall in confidence this survey, but remain the most confident age segment in South Australia;
- Confidence has remained under the 100-point baseline for consumers aged 35-49 for the second consecutive survey;
- Consumers aged 50-64 have also dropped below the 100-point baseline and are the least confident age segment;
- Highest confidence was recorded in businesses with larger FTE count and also businesses with mid-sized turnover;
- Construction, finance and manufacturing industries recorded the largest decreases in business confidence.
Regional South Australia also reflected the overall survey results, with consumer confidence falling 14.2 points, from 109.9 to 95.7, marked by large falls in the West and North region (Upper Spencer Gulf, Far North and Eyre Peninsula) and the Southern region (South Coast, Hills and Murray Plains).
However, confidence amongst regional business owners rose 4.1 points, from 107.9 to 112.0.
West and North (Upper Spencer Gulf, Far North and Eyre Peninsula):
- A decrease in consumer confidence – down 20.9 points from 116.1 to 95.2 (its largest fall since August 2011 and lowest result since July 2017); and
- An increase in business confidence – up 8.4 points from 102.4 to 110.8 (its fourth consecutive confidence result above the 100-point baseline).
Southern (South Coast, South East, Hills and Murray Plains):
- A decrease in consumer confidence – down 19.8 points from 111.4 to 91.6 (its largest fall since February 2011 and lowest result since October 2017); and
- An increase in business confidence – up 5.7 points from 114.9 to 120.6 (its highest confidence level since August 2008).
Mid North and Riverland (Barossa, Mid North, Riverland and Yorke Peninsula):
- A decrease in consumer confidence – down 3.8 points from 104.6 to 100.8 (but now the most confident rural region for the first time since October 2016); and
- A decrease in business confidence – down 2.1 points from 103.4 to 101.3 (its second consecutive fall and now the least confident rural region in the state).
Link to report here.