Australia enterprise confidence plunges to -29 as Iran struggle shock hits outlook

Australian business confidence collapses as energy shock crushes outlook.

Earlier:

Summary:

• Business confidence plunges to -29 (from 0 prior).
• Drops to its lowest since the pandemic.
• Second largest monthly drop on record
• Business conditions down to +6 (prior +7)
• Sales ease slightly (+11 vs +12)
• Profits fall to +1 (from +4)
• Cost pressures surge, margins squeezed

Australian business confidence collapsed in March, posting one of the sharpest deteriorations on record as firms reacted to the economic shock stemming from the Iran war and surging energy prices.

The NAB Business Confidence Index plunged 29 points to -29 in March, down from 0 in February. The scale of the decline ranks as the second largest monthly fall in the survey’s history, comparable to periods of acute financial stress, and signals a rapid and broad-based deterioration in sentiment across the business sector.

In contrast, business conditions held steady at +6, highlighting a growing disconnect between current activity and forward-looking expectations. While firms are still reporting reasonable operating conditions, confidence has collapsed as they brace for a more challenging environment ahead.

Underlying details point to mounting cost pressures and margin compression. Sales eased slightly but remained relatively firm at +11, down from +12, while profitability deteriorated more sharply, with the profits index falling to +1 from +4. This suggests businesses are increasingly struggling to absorb rising input costs.

Purchase costs surged at a quarterly pace of 3%, driven in part by higher energy prices, but firms appear to be finding it difficult to pass these increases through to consumers. Retail price growth slowed to 0.5% from 0.9%, indicating limited pricing power and intensifying pressure on margins.

The backdrop is further complicated by tighter monetary policy, with the RBA having raised rates again in March to 4.1%, alongside expectations that fuel-driven inflation could push headline CPI toward 5% in the second quarter.

Taken together, the data paints a stark picture, businesses are still operating at reasonable levels today, but confidence has effectively collapsed as firms anticipate a sharp deterioration in conditions ahead.