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Modest falls in profitability lead to weaker business conditions

Modest falls in profitability lead to weaker business conditions

(13 March 2013 – Australia) Business conditions weakened in February, largely due to a lack of demand in the non-mining sectors paired with a strong Australian dollar affecting the manufacturing sector, a new survey has found. Business conditions fell to -3, down from -2 in January, as companies recorded modest falls in profitability, although employment conditions improved, the survey reported.

‘‘Perhaps most concerning is the slump in forward orders, with the index declining to its lowest level since May 2009,’’ a source reported.

‘‘Combined with still low capacity utilisation, stocks and employment and capital expenditure readings, forward indicators imply little improvement in near-term demand.’’

Retail and wholesale conditions improved as more consumers opened their wallets to spend on discretionary items, although the sectors remained soft overall, the survey reported.

Recreation and personal services also picked up, while mining activity lifted as commodity prices rose. In contrast, conditions in the construction and manufacturing industries remained poor.

Across the states, New South Wales was slightly weaker at -6, Victoria was unchanged at -1, Queensland improved to -3, Tasmania fell to -2, while Western Australia lifted to 3.

At the same time, business confidence edged down slightly from 3 points in January from 1 point last month, remaining below the long-term average, as confidence fell in the mining, wholesale, and recreation and personal services industries.

Confidence was stronger in the finance, business and property sectors, on the back of improvement global market conditions and lower funding costs.

The source had revised its GDP expectations for the year up from 2 percent to 2.3 percent

Unemployment is expected to track up to 5.7 percent by the middle of year.
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