Pessimistic businesses to blame for downward trading outlook

Manufacturing growth will fall to -8.0 points over the next six months, and over half of businesses aren’t prepared for the fall, according to a new business index from one of Australia’s largest banks.

The inaugural Commonwealth Bank Future Business Index shows a pessimistic outlook, registering -8.0 points for manufacturing, -13.3 for wholesale trade, and retail down to -7.0.

Happily, business services, and health and education will both grow, to 15 points and 17.3 points respectively. All up, Australian business trading will contract, to -0.3.

According to the Bank’s Executive General Manager of Corporate Financial Services, Symon Brewis-Weston, the main problem is that middle-of-the-range businesses aren’t showing any confidence.

Over half of businesses analysed in the new Index – each with a turnover of $10m – $100m – are not properly prepared for trading contraction.

Though one-third of businesses believe conditions will decline over the next six months, many of these still do not have a risk, business continuity or succession plan in place.

“The outlook suggests that in general, mid-market companies are not confident about their position in which to weather uncertain business conditions in the near future,” said Brewis-Weston.

“The general lack of confidence we are seeing may result in a low appetite for risk and capital investment over the next six months. Despite this, activity amongst Australian businesses looks set to continue to grow, albeit at a slower pace and in certain pockets of the economy. For those companies which take a proactive approach to management and planning, opportunity is still very much alive.”

The Index shows that a large percentage of companies worry about the US market and its effect on businesses in Australia.

“Perhaps surprisingly, more businesses are concerned with the economic picture in the US rather than what is taking place on our doorstep in Asia,” said Brewis-Weston.

“Over half (54%) of businesses said that weak economic conditions in the United States would impact on their organisation over the next six months, compared to those who identified Asia (48%) and China specifically (47%). Economic / debt issues in Europe were of even less concern (42% of respondents).”

 

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