Australian business conditions have taken a steep turn for the worse as confidence slumped to record lows in the eye of October's financial storm, and even a bold cut in official interest rates provided only cold comfort.
A closely watched survey of 400 firms from National Australia Bank showed sales, profits and employment all fell. A dive in forward orders pointed to more pain ahead, which will only add to expectations of further cuts in interest rates.
The survey's main index of business conditions dropped 10 points to -11 in October, the lowest since April 2001. Its measure of confidence plunged 21 points to -29, gloomier even than the depths reached in the 1990/91 recession.
"It appears that the continuing volatility in global equity markets, emergency financial packages, falling commodity prices, and talk of global recession have finally broken business optimism and now fear reigns supreme," said Alan Oster, group chief economist at NAB.
"Indeed it is worth noting that a confidence reading worse than the bottom of the 1990s recession has more to do with fear of the unknown than actual current outcomes," he added.
He noted the main conditions index was still well above the lows around -40 hit in the early 1990s, though the sharp drop in forward orders suggested more weakness lay ahead.
"Probably the most concerning reading in the entire survey was the very sharp fall in forward orders," said Oster.
The survey's measure of future orders sank 11 points to -20 in October, while the sales index fell 11 points to -10 and profitability lost 9 points to -13. Employment also took an 8 points spill to -10, the lowest since 2001.
The only improvement came in export orders, perhaps reflecting the sharp depreciation in the Australian dollar.
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The turmoil in financial markets in October even overshadowed the Reserve Bank of Australia's (RBA) aggressive 100 basis-point cut in its key cash rate to 6.0 percent, the biggest reduction in 16 years.
The central bank eased by a further 75 basis points last week, taking the cash rate to a three-year low, and a further easing is expected in December.
The Labor government also waded in with a A$10.4 billion ($7 billion) stimulus package, most which will turn up in peoples' pockets in December. Yet, firms still seemed to be bracing for worse to come, cutting back markedly on investment plans.
NAB's monthly reading of capital expenditure plans dropped to zero in October, far below last year's peak of 17, while annual spending plans were revised down sharply.
RBA Governor Glenn Stevens this week said it was likely firms would rein in previously optimistic spending plans, one reason the central bank had to cut its forecasts for economic growth in the next two years.
Most industries reported slowing activity in October, with the only exception being mining where the fall in the local currency is boosting earnings from resource exports priced in U.S. dollars.
Otherwise, tighter financial conditions and weakening demand weighed heavily on non-food retailing & personal services sectors, manufacturing, wholesaling and finance property.
A special question on financing found around 10 percent of respondents were currently finding finance significantly more difficult to obtain, while around 15 percent reported slightly more difficulty.
Around 40 percent reported no change in the availability of finance and around 35 percent do not currently use finance.