Growth in business credit demand as conditions and confidence remain steady
Business Credit Demand Index by Equifax (September 2017 Quarter)
- Overall business credit applications rose +1.0% (vs September quarter 2016)
- Growth in asset finance and trade credit applications eased (vs September quarter 2016)
- Growth in business loan applications increased (vs September quarter 2016)
Sydney, Australia, Friday, 10 November 2017 – The Quarterly Business Credit Demand Index by Equifax, which measures the level of business loan, trade credit, and asset finance applications, rose at an annual rate of +1.0% in the September quarter, compared to the same period last year.
Released today by Equifax, the global information solutions company and the leading provider of credit information and analysis in Australia and New Zealand, the Index revealed an increase of +3.3% in the number of business loan applications.
This was countered by a close to flat showing in both asset finance applications (+0.1%), and trade credit applications (-0.2%), compared to the same period in 2016.
The growth in overall business credit applications slowed from an annual growth rate of 2.7% in the June quarter to 1.0% the September quarter. This reflected weaker conditions for trade credit and asset finance applications, which offset an increase in business loan applications. The pick-up in the growth of business loan applications was driven by strong growth in lending proposals (+20.9%), while growth in commercial mortgage applications (+10.5%) eased significantly in the September quarter, despite remaining strong.
Neil Shilbury, General Manager, Commercial and Property Products at Equifax, said that the Index demonstrated that business conditions have remained steady, supported by ongoing optimism in business confidence.
“For a long time, there has been very strong growth in construction. However, the decline in commercial mortgage applications seen in the September Index, which is a forward-looking indicator, suggests investment in construction has peaked and is now starting to level off,” Mr Shilbury said.
“Two of the biggest headwinds in recent years have been the slowdown in China, which led to declines in commodity prices and Australia’s national income, and the completion of major projects under construction in the resources sector, which led to falling levels of mining investment.
That said, the negative impacts of these two forces seem to be subsiding. Commodity prices are improving, and much of the drop in engineering construction is behind us,” Mr Shilbury added.
Growth in the number of applications for business credit eased in both the mining and non-mining jurisdictions in the September quarter. The mining jurisdictions (-1.9%) of Queensland, Western Australia, and the Northern Territory recorded a fall in business credit applications in the September quarter and continue to see weaker conditions than the non-mining jurisdictions (+2.3%).
“The easing of growth in the mining states in the September quarter suggests that conditions remain patchy, although the overall pick-up in business loan applications is an encouraging sign,” Mr Shilbury said.
The pace of growth in overall business credit applications eased in the September quarter. Demand for business credit was strongest in TAS (+7.1%) and VIC (+5.2%), while NSW (+0.4%) showed weak growth. All other jurisdictions showed a fall in business credit applications, including SA (-0.1%), QLD (-0.2%), the ACT (-3.8%), WA (-5.0%), and the NT (-6.9%).
Growth in business loan applications picked up in the September quarter (+3.3%). TAS (+7.3%), VIC (+6.3%), and NSW (+6.1%) all showed strong growth in business loan applications, while QLD (+0.4%) remained subdued and WA (-3.9%), SA (-4.5%), the ACT (-7.8%), and the NT (-17.9%) all recorded falls.
Within business loans, growth in lending proposals (+20.9%) picked up strongly in the September quarter, while growth in mortgage applications (+10.5%) eased but remained relatively strong.
“The big boom in housing is now starting to ease. New South Wales and Victoria both benefited from low interest rates during the housing boom, but the slowdown in this sector is starting to become apparent,” Mr Shilbury added.
Trade credit applications fell in the September quarter (-0.2%). The fall in trade applications was driven by QLD (-0.8%), the ACT (-2.6%), NSW (-1.1%), and WA (-7.6%), while positive growth in trade credit applications was seen in VIC (+5.8%), TAS (+2.2%), SA (+1.9%), and the NT (+1.8%).
Within trade credit applications, growth eased but remained positive for the main category of 30 day accounts (+3.2%), but there were falls seen for other account types including 7 day accounts (-19.0%).
Asset finance applications were close to flat in the September quarter (+0.1%). Across the non-mining jurisdictions, growth in asset finance applications was seen in TAS (+14.1%), SA (+3.8%), VIC (+2.7%), and the ACT (+1.8%), while NSW (-2.3%) showed a fall. Across the mining jurisdictions, asset finance applications were close to flat in QLD (-0.1%), but fell in WA (-2.4%), and the NT (-7.5%).
There were divergent movements for asset finance by account type. Applications for leasing (+10.1%) remained strong, and there was positive growth seen for commercial rental (+2.0%), but there were falls seen for hire purchase (-13.9%) and bill of sale (-35.3%).
NOTE TO EDITORS
The Quarterly Business Credit Demand Index by Equifax Index measures the volume of credit applications that go through the Commercial Bureau by credit providers such as financial institutions and major corporations in Australia. Based on this it is a good measure of intentions to acquire credit by businesses. This differs to other market measures published by the RBA/ABS, which measure new and cumulative dollar amounts that are actually approved by financial institutions.
DISCLAIMER
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