Two business surveys index shows dip in confidence for business and consumers

Aussies and business are growing increasingly fearful of a stagnating economy, with new concerns about potential job losses.

Australians are growing increasingly fearful of a stagnating economy and potential job losses, two closely watched economic indicators reveal.

The Westpac-Melbourne Institute Consumer Sentiment Index, which tracks how Australian households assess the general outlook for their personal finances and the broader economy, dipped 0.5 per cent to 84.6 in September from 85 in August.

The NAB business confidence survey showed confidence “sank into negative territory”, down five points to -4 index points in August, after a brief uptick the month before.

The declines were largely propelled by a loss of confidence in the economy.

“The ‘economic outlook, next 12 months’ subindex fell 2.6 per cent to 81.2 and the ‘economic outlook, next five years’ subindex declined 1 per cent to 90.6,” Westpac head of Australian macro-forecasting Matthew Hassan said.

“The lacklustre June quarter national accounts clearly impacted here.

“Indeed, responses over the course of the survey week suggest all of the sentiment decline in the month related to a sharp drop-off among those surveyed after the national accounts release.”

The economy grew just 0.2 per cent for the June quarter, the Australian Bureau of Statistics reported last week, for a year-on-year seasonally adjusted GDP growth rate of 1 per cent.

Australians are growing increasingly fearful of sputtering economic activity, the latest consumer sentiment index from banking giant Westpac shows. Picture: NewsWire / Luis Enrique Ascui

GDP per capita, which measures the value of goods and services divided by population, fell for the sixth consecutive quarter, slipping another 0.4 per cent.

“Excluding the Covid-19 pandemic period, annual financial year economic growth was the lowest since 1991-92 – the year that included the gradual recovery from the 1991 recession,” ABS head of national accounts Katherine Keenan said.

Declining confidence in the economy has also “sparked” renewed concerns about unemployment.

“The Unemployment Expectations Index rose 3.7 per cent to 138.4 in September, up 11 per cent since April and now materially above its long run average of 129,” Mr Hassan noted.

“Recall that higher index reads mean more consumers expect unemployment to rise over the year ahead.

“Notably, the deterioration has been a little sharper among consumers with a job – unemployment expectations across this subgroup jumping 8.3 per cent in the month to its highest level since 2016.”

But while job and economy fears are rising, concerns around interest rates and cost-of-living pressures appear to be easing.

“We continue to see a sustained improvement in responses on family finances, as inflation moderates and tax cuts and fiscal support measures come into effect,” Mr Hassan said.

“The ‘family finances vs. a year ago’ subindex rose a further 1.2 per cent in September to be up 13.1 per cent since July.”

Mr Hassan said the index showed the Australian consumer remained “weak”.

“While that may ease some of the Reserve Bank’s concerns around consumer demand, its main focus is on the extent to which the balance of demand and supply across the wider economy will see high inflation persist,” he said.

The Reserve Bank board next meets on September 23–24.

Westpac expects the board to leave the official cash rate unchanged at 4.35 per cent.

The NAB business report showed a significant drop in both confidence and conditions for the month of August. Picture: NewsWire / Luis Enrique Ascui

According to the NAB’s monthly business survey for August, business conditions dropped back below average in August and confidence plunged to -4 index points.

“The fall in conditions was driven by a drop in the employment subcomponent, suggesting that weaker trading conditions and profitability may now be more materially feeding into labour demand,” the report said.

“The fall in confidence was also marked, while forward orders remained around the negative level that has persisted for some time.

It said retail price growth remained high and continued to outpace broader output price inflation.

“With the recent national accounts showing very soft private sector growth in Q2, the business survey suggests this has carried on into the new financial year and may be beginning to translate into a softer labour market,” it warned.

Originally published as Two business surveys index shows dip in confidence for business and consumers