Sale and profits expectations on the rise

Businesses are seeing marginal signs of economic revival despite confidence remaining in negative territory

Businesses are seeing marginal signs of economic revival despite confidence remaining in negative territory, according to the latest Dun and Bradstreet (D&B) Business Expectations Survey.

March quarter figures show employment growth and capital investment confidence is deteriorating, but sales and profits expectations are on the rise.

Selling price expectations have eased to a degree, but two in three businesses (66 percent) still expect to raise prices in the September quarter.

Capital investment expectations are down four points to -14, with 3 percent of executives expecting an increase and 17 percent eyeing spending cuts.

D&B CEO Christine Christian says while government hand-outs may generate some positives, the short-term outlook is negative in areas such as employment.

"The declining outlook in employment growth continues to be a concern. The fact that the employment indicator has dropped to its lowest level recorded by the survey is a clear sign that this fear is shared by Australian executives," she says.

Thirty-six percent of executives are expecting a reduction in staff, while only eight percent expect and increase.

Meanwhile, the sales index is up 10 points to -38 and the profits index is up 11 points to -46.

"Sales and profit expectations have improved but are still in negative territory. This indicates that expectations in these areas may have turned the corner," she says.

"Ultimately, we need to see consistent improvement in key areas like sales and profit expectations before it is evident that executives are feeling positive about Australia's business prospects."

Movements in the Australian dollar, credit market and petrol prices have had a marked impact on businesses, according to the report.

Six in 10 firms have been negatively impacted by the dollar, a fall of 14 percent in two months.

Recent changes in credit market conditions have affected more than half (52 percent) of firms.

Petrol price fluctuations have positively impacted 45 percent of businesses, up 2 percent from last month.

The actual statistics for the March quarter show that half of firms expect lower sales, which is up 1 percent on the December quarter.

Sixty-one percent of firms recorded lower profits, down 2 percent on the last quarter.

D&B economic consultant Duncan Ironmonger says tonight’s Federal budget will be closely examined to see whether it delivers sufficient stimulus to the economy.

"The Reserve Bank did not alter the cash rate last week leaving room for further cuts later in the year if needed," he says.

"The latest D&B survey shows that although business expectations are still negative, there are tentative signs that the worst could be over."

D&B Australasia conducts Business Expectations Surveys on a monthly basis.

Each quarter, more than 1,200 business owners and senior executives across Australia are quizzed on upcoming quarterly sales, profits, employment, capital investment, inventories and selling prices.

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