Business conditions fall further in October, recording their weakest outcome since May 2009, with construction sentiment falling sharply, according to the latest NAB monthly business survey.
The index fell from +1 to -1 partly unwinding a modest improvement in September, and showing no signs of improving despite the RBA cutting the cash rate by 25 basis points on October 3 to 3.25%.
Confidence in the construction sector fell 11 points to -9 points, "with the lure of lower borrowing rates seemingly having little positive impact on sentiment in construction".
“Businesses were more downcast in October, with the pessimism particularly apparent in the mining and construction sectors," says NAB chief economist Alan Oster.
“Confidence deteriorated heavily in construction, returning to the heavily negative levels that have applied since May and making the improvement in September look anomalous.
"Mining conditions are currently the weakest they have been since the Queensland floods in early 2011, which caused major disruptions to coal mine production.
“It appears that the RBA’s decision to lower the cash rate by 25 bps to 3.25% at its October meeting failed to improve sentiment, with firms instead likely to be focussing on the reasons for the rate change – a softening global economy, fiscal tightening, a soft labour market and high Australian dollar,” says Oster.