Executives expect slower growth in upcoming qtr: D&B


Australian executives are expecting slower growth in sales, employment, inventories and selling prices for the September quarter

Executives expect slower growth in upcoming qtr: D&B
Executives expect slower growth in upcoming qtr: D&B survey
May 11, 2010

Australian executives are expecting slower growth in sales, employment, inventories and selling prices for the September quarter, according to Dun & Bradstreet's (D&B) latest Business Expectations Survey.

New data shows the expected sales index fell five points to 28 returning to the level of the March quarter.

However, the sales index remains high and is up 76 points on the June quarter 2009 trough.

Thirty nine percent of firms expect an increase in sales and 11 percent anticipate a decrease in the September quarter.

Employment expectations are down one point on the June quarter but remain 34 points up on the June quarter 2009.

Fifteen percent of firms are planning to increase staff levels and seven percent expect to reduce employee numbers in the quarter ahead.

PROFITS, INVESTMENT REMAIN STEADY

Other key results from the D&B Survey show profit expectations remain strong - with the index now at its highest level in five years.

Similarly, expectations for capital investment remain on par with the March quarter signalling executives are still keen to invest in their businesses if they can access credit.

Nineteen percent of firms expect to increase capital investment, while just three percent are planning to decrease spending in this area.

All sectors continue to have positive expectations for growth in employment numbers, the third time this has occurred since the June quarter 2008.

Meanwhile, selling price expectations have fallen by four points to an index of 15.

One in five (20 percent) firms expects to raise prices in the September quarter, while five percent expect to lower prices.

However, D&B says this decline is a sign there may be some easing of inflationary pressures as firms respond to the impact of rising interest rates.

Concerns over the impact of rising selling prices on underlying inflation were seen as a key factor for triggering the latest interest rate by the Reserve Bank of Australia (RBA).

However, in response to the slight decline in sales expectations inventories expectations are also down slightly on the previous quarter.

This is coming off a high base with expectations for growth in inventories for the latest four quarters the highest in more than four years.

Seventeen percent of executives expect to increase inventories in September quarter, while nine percent plan to reduce stock levels.

INFLATIONARY PRESSURES EASE AS RATES RISE

According to Dun & Bradstreet’s CEO Christine Christian, the impact of rising interest rates and a reduction in government stimulus is having the desired effect on inflationary pressures.

"The reduction in selling price expectations is a positive sign to ease government concerns about growing inflation," Christian says.

"Given that the RBA has listed rising selling prices as a key trigger for interest rate rises, this may reduce the need for further immediate action by the central bank," she says.

Christian says despite a slight fall across a number of indices Australian executives have generally maintained the same positive outlook in 2010.

"Despite a slight fall in confidence levels in key indices such as sales and employment the overall outlook for Australian executives remains positive and substantially better than at the same point in time in 2009. The question now is how long will this positive outlook continue?"

OBSTACLES THREATENING RECOVERY

When it comes to issues standing in the way of recovery, business-to-business payment days are still having a negative impact on one in three (36 percent) firms, a fall of seven percent since March.

Dun & Bradstreet’s Trade Payment Analysis reveals a deterioration in payment terms in the March 2010 quarter has taken terms up to 54.1 days.

This has led to concern the payment behaviours of Australian firms could derail the economic recovery, with terms deteriorating for the second consecutive quarter despite improving business conditions.

Thirty three percent of firms rank interest rates as the major influence on their business and 23 percent consider wages growth to be their primary concern.

Only 17 percent of executives believe fuel prices will be the primary influence on operations in the quarter ahead.

Access to credit also scored a vote of 17 percent as the most important influencing factor on their business in the quarter ahead.

With the continued improvement in profits expectations, 27 percent of executives plan to reduce their current business debt levels in the next three months, 16 percent reduce significantly and 11 per cent moderately.

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

Each quarter 1,200 business owners and senior executives representing major industry sectors across Australia are asked if they expect increases, decreases or no changes in their upcoming quarterly sales, profits, employment, capital Investment, inventories and selling prices.


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