The latest illion Business Expectations Index has recorded a severe slump in business conditions over the March 2019 quarter, with the Actuals index falling to its lowest point since the March 2016 quarter.
The index now stands at 6.9 points, more than halving in value compared with both the prior quarter and the corresponding period last year, and close to the March 2016 figure of 6.1 points.
This deterioration aligns with the official data on the economy, which showed a marked slowing in late 2018 and into 2019. GDP per capita fell in both the September and December quarters of 2018 – a ‘per capita recession’ was a term used – and data on housing, consumer demand and business investment suggest a further poor result for the March quarter.
Business Expectations Index
The overall results from our preliminary illion Business Expectations Survey, conducted over April 2019, show the expectations index stood at 19.4 points, down 5.5 per cent from the prior quarter. This represents a 10.8 per cent fall compared with the prior corresponding period. The decline was driven heavily by the capital investment expectations index, which more than halved when compared with results from both the previous quarter and the prior corresponding period.
In terms of industry-specific expectations data, we found surprising resilience in the retail sector, with expectations up by 50.3 per cent quarter-on-quarter, while the figure more than doubled compared with the year-earlier period. The construction and manufacturing sectors also recorded fairly positive outlooks for the next quarter, but the wholesale, transport/communications/utilities and services industries all reported declines in their expectations data.
It is worth remembering that the March quarter 2016 weakness identified in the illion survey pre-empted interest rate cuts from the Reserve Bank in May and August of that year. Interestingly, the futures market is currently pricing in two 25-basis point interest rate cuts over the next 12 to 18 months, which if realised, would take the official cash rate to a new record low of 1.0%.
Leverage free insight
Each month, illion asks a sample of executives if they expect an increase, decrease or no change in their quarter-ahead sales, profits, employees, capital investment and selling prices compared with the same quarter a year ago. The executives are also asked for actual changes over the twelve months to the latest completed quarter.
The analysis from illion's monthly Business Expectations Survey provides a leading indicator of sentiment across the business landscape to help you plan for economic trends. To read the full analysis from last quarter download the report.