Business confidence falls for third month

Business confidence has fallen for the third consecutive month, and has almost halved since reaching a decade high in February.

There was now a clear change of direction which was beyond what could be put down to "usual monthly volatility," the National Bank says in its latest business outlook survey.

Just 28 per cent of respondents expect business conditions to improve in a year, down 12 points from the previous month.

Leading the decline were the agricultural and manufacturing sectors with business confidence in those areas falling 14 points from June.

"We characterised last month's decline in confidence as the economy merely shifting from a gallop to a canter. Perhaps this month is seeing a shift from a canter to a trot."

Firms' own activity expectations fell seven per cent, but held up better overall, with 32 per cent of respondents expecting better activity in the coming year.

All sectors, bar manufacturing recorded declines in own activity reading.

Just eight per cent of respondents expected to hire staff in the coming year, a fall of five points.

The construction sector fared the best of all the sectors in this area, posting a four per cent increase in the month - something the bank says could be due to the numbers of employees who were moving to Australia, rather than a sign that things are expected to pick up.

Investment intentions fell five points, while profit expectations fell 10 points to a net nine percent of business who expect to see an improvement in their bottom line in the next year.

Interestingly, just 31 per cent of respondents expect to be putting prices up, down from 39 per cent in June, in the next year.

The result was surprising given the impending GST hike, the bank said.

"Perhaps this is an indication of the tough demand environment firms are facing, and the reality that there will be a lot of consumer resistance to price rises, no matter what the cause."

The bank said most respondents were resigned to the fact the Reserve Bank will lift the Official Cash Rate again tomorrow.

"But with signs that the economy is not surging away and momentum is levelling out, we find it difficult to envisage rates will move up every six weeks."