Analysts believe confidence levels are showing signs of stabilising after troubled times
August 6, 2013
Is the economic night darkest just before dawn? At a time when interest rates are at record lows, Dun & Bradstreet’s (D&B) latest Business Expectations Survey indicates that this could possibly be the case.
And the accountancy’s curiously bundled sector of “transport, communications and utilities” (TCU) sector continues to show
spending conservatism
in the face of ongoing market uncertainty.
D&B analysts believe business confidence levels are showing signs of stabilising, with the year-end outlook for profits, sales, employment and capital investment beginning to level out.
After declining through much of the year, initial expectations for the December quarter have steadied as businesses look beyond the federal election, and as the effect of lower interest rates and a lower Australian dollar flow through the economy, they say.
While businesses expect to see a rise in profit levels in the coming months, they remain reluctant to spend, with the capital investment index sliding further into negative territory.
As businesses seek to stay lean and control costs, hiring new employees remains off the agenda.
“While businesses are not intending to increase investment or employment in the months ahead, and although commercial credit growth is weak, business owners are more confident about sales and profits returning,” D&B CEO Gareth Jones says.
“As we await a period of sustained economic stability, it may be that the conclusion of the election is the event that kicks these initial findings on sentiment from stable to optimistic.”
Jones notes that one-third of businesses are delaying their spending and investment decisions until after the election.
“If this spending does in fact transpire after the poll, it will further boost the growth outlook,” he adds.
TCU firms remain in the grip of an aversion to risk and expansion, with 65.5 percent of those surveyed in July saying they were unlikely to seek credit or finance for growth in the quarter ahead, up from 61 percent in June, though down from 71.7 percent in May.
Of the barriers to business growth, ‘utilities and operational costs’ were nominated increasingly as the central issue, up from 66.7 percent in May to 70.7 percent in July.
Of the other five survey options, the next biggest was ‘slow growth in demand’, at 13.8 percent in July.
There appears to be a growing conviction amongst TCU firms that the outcome of the election is irrelevant to the likely performance of their operations, with that stance rising to 56.9 percent in July from 36.7 percent in June, while those who were unsure fell from 41.7 percent to 17.2 percent in the same period.
Those expecting a change due to a Coalition win sank a little from 23.3 percent to 19 percent and as did a Labor win, down from 8.3 percent to 5.2 percent.
The outlook for cashflow in the quarter ahead was an increasing concern, up from 41.7 percent in May to 63.8 percent in July,
