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
