Business confidence sees slight uptick in July: Mackay Goodwin
July saw a marginal increase in business sentiment from the previous month, according to Mackay Goodwin’s monthly Business Strength and Solvency Index.
Mackay Goodwin's latest business strength and solvency index (BSSI) indicated a small increase for July, with business sentiment increasing from 56.41 per cent to 56.42 per cent.
Though small, the increase indicates a slightly more promising future for business confidence despite consistent economic challenges and factors continuously offsetting this.
The BSSI monthly figure is calculated using an exclusive equation which takes into account key economic indicators and provides a comprehensive snapshot of the Australian business landscape.
The increase in business confidence for July can be attributed to an increase in the NAB business confidence index. However, this has been challenged by other factors.
For July, Australia’s NAB business confidence index increased to 4 after being measured at -2 for June.
This is the highest level since January 2023, due to seven out of eight industries experiencing an increase such as manufacturing and wholesale.
Contradicting this is Australia’s Westpac-Melbourne Institute Consumer Index, which fell to a six-month low. The index has measured at 82.7 per cent compared to the 1.7 per cent increase it experienced in June.
This is the fifth time the index has declined this year as persistent inflation continues to negatively impact the economy and higher borrowing costs offset any boost from tax cuts and other fiscal support measures.
Persistent inflation fears were reflected by the RBA during the June meeting as continued rate increases were likely.
Mackay Goodwin CEO Domenic Calabretta said although the index highlighted marginal positive change, there are still multiple factors jeopardising this.
“The BSSI increase for July is marginal, with the RBA remaining vigilant that the window to return inflation to target, in a reasonable timeframe, without any increases in unemployment numbers, is becoming narrower,” he said.
Calabretta said despite the fact the NAB business confidence index also experienced an upsurge, Australians would continue to face multiple economic challenges, likely to continue into the foreseeable future.
“While NAB’s business confidence index shows an upsurge in confidence between May and June, sitting at the highest level since January 2023, that figure is offset by Westpac’s consumer sentiment index, which has seen a fall to a six-month low,” Calabretta said.
“In short, the cost of living is continuing to bite, with financial market analysts predicting a one-in-three chance the Reserve Bank will use its August 5-6 meeting to lift the official cash rate to a 13-year high of 4.6 per cent. The increased cost of living is causing thousands of Australians to seek financial help."
For the upcoming month, the Mackay Goodwin BSSI will be focused on consumer inflation expectations, the unemployment rate and the Judo Bank manufacturing report.
