SA businesses are feeling confident, the latest BankSA State Monitor says

South Australian businesses have shrugged off concerns around interest rates and cost pressures to report an increase in confidence in the latest BankSA State Monitor.

SA businesses are feeling good about the future.

South Australian businesses have a spring in their step despite an uptick in gloomy economic news, with local firms looking to employ more workers and spend more on plant and equipment.

The BankSA State Monitor, released on Tuesday, shows business confidence has improved by 5.1 points to 115.6, where 100 is a neutral level, while consumer confidence fell 3.4 points to 107.8.

BankSA state general manager business David Firth said business confidence had bounced back from two consecutive declines in previous surveys, with large boosts to sentiment in the construction, finance and recreational sectors.

Mr Firth said his expectation was that business confidence might have moderated recently, given the predominance of coverage around issues such as interest rates and cost of living pressures, however the responses showed local companies were still feeling optimistic.

“It’s a really positive sign that businesses are confident to hire more people to do the work that they need to do.,’’ he said.

“The shifts (in sentiment) were pretty material - 19 per cent up in terms of hiring over the past three months and 12 per cent up on the intention to hire over the next period.

“And then also, a 16 per cent higher result for businesses planning on making a major purchase. They’re looking to spend despite the uncertain outlook.’’

Mr Firth said smaller businesses were not so optimistic, and some sectors such as discretionary retail would likely face some challenges.

He said many businesses, having survived the pandemic, were probably more resilient at this stage of the cycle and had improved their operations, hence the positive outlook.

“And I think mid to large sized businesses are reasonably well placed compared with some of the smaller businesses that can’t pass on increasing costs.’’

Overall, businesses are marginally less confident about the outlook for the SA economy, with that measure dropping 1 per cent, however there was a 2 per cent increase in business owners predicting an increase in their own fortunes.

The household financial position of business owners was cited as the largest driver of optimism, along with income security and the long term outlook for the state.

Negative factors included the cost of energy for the home, interest rates, and wages relative to the cost of living.

Energy costs also topped the list of negative factors on the consumer front, while world affairs and wages relative to the cost of living were also a drag on sentiment.

While consumer sentiment dipped, large purchases over the recent period and the intention to make further large purchases in the future strengthened marginally.

Mr Firth said the strong employment outlook could explain this apparent contradiction, with consumers confident they could get another job if they needed to.

Mr Firth said large retailers were also likely influencing this trend through discounting and end of financial year sales, and people were also likely dipping into savings.

“The fall in consumer confidence was driven by a 13 per cent increase in people concerned about their own household situation, both now and over the coming 12 months,’’ he said.

“While confidence still sits in positive territory overall, we can see cost-of-living pressures are having an ongoing effect.”

Consumers in the 25-34 age group reported the largest decline in confidence, while the 50-64 age group also declined and has now fallen below the 100-point benchmark.

Consumers aged 18-24 remain the most confident.

Confidence in the retail, manufacturing and community services industries is below their long-term averages.

Consumer confidence in the regions decreased by 3.8 points in July to 106.9 points, reversing gains from the previous survey. Regional business confidence decreased by 2.7 points to 103.1 points this survey.

“The West and North region was the standout, recording increases in both business confidence (up 11.9 per cent) and consumer confidence (up 1.0 per cent),” Mr Firth said.

“Conversely, both the Mid North & Riverland and Southern regions experienced a decline in both business and consumer confidence. The largest decline has seen business confidence in the Southern region fall below the 100-point benchmark.”

The independent survey is based on a statewide phone survey of 300 consumers and 300 small business owners and managers.