Business confidence converts to actual performance in December

Thursday 6 February, 2014

General business conditions and sales revenue in Queensland rose to their highest levels in more than a year during the December quarter, according to the latest CCIQ Westpac Group Pulse Survey.

After confidence rose to near-unprecedented levels in September, CCIQ General Manager of Advocacy Nick Behrens said the improvements were to be expected.

“Queensland is finally starting to see a conversion of high confidence into actual improvement in general trading conditions and other business indicators,” Mr Behrens said.

“This quarter, the absence of the federal election influence saw a minor drop in confidence, but from a historical perspective, business confidence in Queensland remains at near peak levels,” Mr Behrens said.

“At state level that confidence has dropped slightly from 63.3 percentage points to 58.6 points, while nationally it fell from 65.5 points to 60.2.

“Most importantly, general business conditions rose above 50 percentage points for the first time since December 2012 to sit at 52.4, while sales revenue also jumped above 50 points for the first time since June 2012.

“These results mark the end of a long-running disconnect we saw in 2013 between confidence and the actual trading environment.”

To download the full CCIQ Westpac Group Pulse Survey of Business Conditions Report for December 2013

However, Mr Behrens said profitability stayed below the 50 point mark at 43.5 to be the one indicator that is yet to shake its underperformance.

“Realistically, we anticipate it will take several quarters of improved sales before the profitability indicator improves, dragging capital expenditure with it,” he said.

“But businesses have indicated while the signs were there for a significant improvement on last year, there were still some factors that must come into effect.

“The key players in an improved year will be the Federal Government’s ability to deliver on its election commitments and the plight of drought-affected regions,” he said.

“The prolonged drought is also negatively impacting on the supply chain in the agriculture sector and many businesses will be hoping to see some more rain in the next few months.”

The Sunshine Coast and Gold Coast were two of the strongest performing regions in the December quarter on the back of improved tourism and construction markets.

“The Sunshine Coast construction industry is starting to show some really positive signs and projects like the Sunshine Coast University Hospital have certainly created confidence in the region,” Mr Behrens said.

“Both regions have had a big summer of tourism thanks to the lowering Australian dollar and great weather during the holiday period, which would have also had a big impact on conditions.

“Overall, if businesses can build on the improving business conditions and convert sales growth into profitability, 2014 is going to be a strong year for Queensland businesses.”

Key points

  • Although remaining in positive territory, the Pulse Business Confidence Index decreased in the December quarter by 4.5 percentage points to 58.8.
  • 51 per cent of Queensland businesses expect economic conditions in Queensland to be stronger over the coming twelve months, while 53 per cent expect conditions to improve nationally.
  • General business conditions have increased over the three months to December, increasing 3.5 percentage points to 52.4. This is the first time the index has been recorded in positive territory since December 2012.
  • Sales and revenue improved over the December quarter, with the Pulse Sales and Revenue Index increasing by 4.0 percentage points to 52.4, the first time the index has reached positive territory since June 2012.
  • The Pulse Profitability Index remains relatively flat, increasing by only 1.4 percentage points to 43.5 in the December quarter.  

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