Business conditions fell sharply in December, and while caution should be taken when interpreting data around the Christmas/New Year period, this outcome continues the downward trend in conditions over the second half of 2018. At face value, the fall over the past 6 months suggests a significant slowing in the momentum of activity in the business sector – especially from the highs seen earlier in the year.

The deterioration in conditions in the month was driven by declines across trading, profitability and employment and was relatively broad-based across states and industries. Conditions remain particularly weak in the retail industry which reports further ongoing deterioration. Capacity utilisation remains above average, though forward orders are below average (and falling) and alongside below average confidence suggests conditions are unlikely to rebound. Monitoring the future conditions and orders track will be critical regarding our outlook for the economy in 2019.