Biz expectations return to positive territory

By: Graham Gardiner

There has been a sharp turnaround in business expectations despite lower sales and staff over the June quarter, according to

There has been a sharp turnaround in business expectations despite lower sales and staff over the June quarter, according to Dun & Bradstreet (D&B).

The latest D&B National Business Expectations Survey reveals sales and profit expectations have recorded the greatest one-quarter rises since the survey began.

Forty-four percent of respondents expect an increase in sales, and 31 percent forecast an increase in profits.

The employment indicator has also risen sharply, with 15 percent of businesses expecting to increase staff in the December quarter.

Capital investment expectations are at the highest level in six years, with 17 percent of firms expecting an increase in this area.

Expectations for growth in inventories has also reached record highs, as 18 percent of firms plan to increase stock while only 10 percent expect to decrease.

Finally, selling price expectations have fallen to the lowest level in more than four years, with 35 percent of firms intending to increase prices.

D&B CEO Christine Christian says the significant uplift in executive expectations indicates many firms believe Australia is on the road to recovery.

However, she warns against executives relaxing their tight focus on the fundamentals too early.

"The improvement in key indices such as employment and sales expectations is a sign that the economic stimulus has been successful in encouraging household spending," Christian says.

"However the road to recovery will continue to be challenging and the last thing Australian firms need is for executives to see recent signs of promise as an indicator that they can relax their focus on the fundamentals of cash flow and risk management."

According to Christian, a combination of cash-flow restraints, a high debt interest burden and tightened criteria for new lending will prove a difficult combination.

"As Australia works towards putting itself back on the path to sustained growth, executives must tightly manage their operations to ensure a speedier return to prosperity," she says.

When it comes to specific issues expected to influence operations in the December quarter, 36 percent of executives rank wages growth as the main perpetrator.

Meanwhile, 30 percent expect interest rates to be their main concern, followed by fuel prices on 20 percent.

Despite business indicating a more positive outlook for the coming months, actual results for the June quarter are not so promising.

Forty percent of firms experienced lower sales compared with the June quarter 2008, while 26 percent increased sales.

In terms of profit, 38 percent of firms recorded decreases and only 18 percent increased profits.

Thirty-one percent of firms raised selling prices, while 12 percent decreased prices.

Twenty-one percent has fewer staff and only 11 percent had more staff in the June quarter 2009.

When it comes to capital investment, 17 percent of firms spent more, while 7 percent decreased expenditure in this area.

D&B’s economic consultant, Duncan Ironmonger, says despite month-to-month variations in retail sales turnover, the annual rate of growth of retail sales in volume terms over the first half of 2009 has been 5 percent.

This is far ahead of the negative growth in mid-2008 and is the best growth in retail sales volume since 2007.

"Although the impact of the Federal fiscal stimulus packages will abate, the Reserve Bank seems likely to maintain a policy of low interest rates over the second half of 2009. This should help maintain both housing investment and consumer spending in the months ahead.

"The D&B survey indicates that after five quarters of declining expectations, sales and profits expectations are now back in positive territory. A rise of over 40 points in these indexes for the December quarter is the greatest recorded in the history of the survey," he says.

Overall, the D&B index for expected sales is up 46 points to 22, and the profits index is up 44 points to 11.

Employment expectations are up 29 points an index of 7, while capital investment expectations are up 20 points to an index of 12,

Inventories expectations are up 26 points to an index of 8, and the selling prices index is down 25 points to an index of 27.

D&B Australasia conducted the latest Business Expectations Survey in July 2009.

Each quarter, 1,200 Australian business owners and senior executives representing major industry sectors are quizzed on their upcoming sales, profits, employment, capital investment, inventories and selling prices.

Subscribe to our newsletter

Sign up to receive the ABC e-newsletter, digital magazine and other offers we choose to share with you straight to your inbox

You can also follow our updates by liking us on Facebook