Profits and investment to fall: D&B report

Findings from latest Dun and Bradstreet Business Expectations Survey reveal dive in profits, sales and investment confidence

Profits and investment to fall: D&B report
Profits and investment to fall: D&B report
Australia’s executives remain pessimistic about the local business outlook, as key economic indicators remain embedded in negative territory.

Findings from the latest Dun and Bradstreet (D&B) Business Expectations Survey reveal a fall in profits, sales and investment confidence for the September quarter, due to poor March results.

The index for expected sales is up 24 points to -24, with nineteen percent of executives are expecting an increase in sales and 43 percent expecting a decrease.

The profits index is also up 24 points to -33, with 15 percent of executives expecting profits to rise and 48 percent expecting a fall.

These expectations reflect the weak March results, where 47 percent of businesses saw a decrease in sales and 57 percent recorded lower profits.

Despite poor performance, the index has lifted, with 19 percent of businesses anticipating an improvement in the September quarter.

Capital investment expectations are up two points to an index of -8, with 8 percent of executives expecting an increase and 16 percent expecting to cut spending.

The expectations of those in the retail sector have improved more significantly than others, with the retail sales index increasing by 33 points.

D&B’s economic consultant, Duncan Ironmonger, says the sharp improvement in the rate of growth of retail sales since November 2008 indicates the strong effect of recent Government stimulus packages.

"By November the annual rate of growth of retail sales had fallen to just 2 percent. By May 2009 this has surged to 7 percent, and is now above the long term average annual rate of 6 percent. Continuing low interest rates should help maintain retail sales growth in the months ahead," Ironmonger says.

"The D&B survey indicates that after four quarters of declining expectations, sales and profits expectations are heading back towards positive territory. The 24 points rises in these indexes are the greatest rises recorded in the history of the survey," he says.

D&B CEO Christine Christian admits the small signs of improvement are positive, yet the road to recovery still has a long way to go.

"Views about the current state of the local economy vary significantly however our latest survey reveals that Australia’s executives remain largely downbeat about the outlook," Christian says.

"This is a clear indication that we may not experience the V-shaped recovery that some have anticipated. Businesses need to remain focused on managing the challenges that lie ahead as the road to recovery remains long," she says.

"However there are some signs of promise. Australia is faring better than other developed economies and our businesses are demonstrating that signs of promise are on the horizon. Despite this, we need to see significant and continued improvement in executive expectations before we are confident that the fundamentals exist to put Australia clearly back on the path to growth."

Both positive and negative impacts are being recorded from influences such as the Federal Budget, credit market and petrol prices.

A total 28 percent of firms say the May Federal Budget will have a positive impact on their business.

Recent changes in credit market conditions have negatively impacted 53 percent of firms, while 41 percent say petrol prices have positively impacted their business.

Issues expected to influence operations in the September quarter include interest rates, fuel prices and wages growth, at 32 percent, 30 percent and 21 percent respectively.

Similar to other indicators, expectations for employment have made a small upward movement but are still in negative territory, with 31 percent of firms expecting to cut back on staff.

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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