Business credit 'critical' to recovery: D&B


Executives are expecting slower growth in inventories and capital investment compared to the June quarter, says new survey

Business credit 'critical' to recovery: D&B
Business credit 'critical' to recovery: D&B
June 9, 2010

Access to business credit is critical to continuing Australia’s recovery, with signs the impact of tighter lending conditions is being to be felt by many firms.

The latest Dun & Bradstreet (D&B) business expectations survey reveals executives are expecting slower growth in inventories and capital investment compared to the June quarter.

Twenty percent of Australian executives reported they had less access to credit in the last quarter and one in five have indicated their ability to access credit will be the most important influence on their business in the quarter ahead.

The D&B survey, which examines expectations for the September quarter, also shows employment, profit, sales and selling price expectations has fallen since the June quarter, but all remain positive and well above GFC levels.

INVESTMENT & INVENTORIES

Expectations for growth in capital investment are down on the March quarter; however they remain positive signalling executives are still keen to invest in their businesses if they can access credit.

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

Inventories expectations are also down on the previous quarter however the index comes off a high base.

Expectations for growth in inventories have been at their highest level in more than five years for the last four quarters.

Sixteen percent of executives expect to increase inventories in the September quarter, while ten percent plan to reduce stock levels.

SALES & EMPLOYMENT

The expected sales index fell ten points to 23 but remains well above the trough levels that prevailed from the September quarter 2008 to the September quarter 2009.

The decline in sales expectations is also having an impact on the employment plans of Australian executives.

Employment expectations are down four points on the June quarter 2010 but remain 31 points up on the June quarter 2009.

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

Wholesalers have the highest index at net 10, with 16 percent expecting to increase employment and six percent expecting to decrease staff numbers.

SELLING PRICES & PROFITS

According to D&B’s CEO Christine Christian, recent interest rate rises and tight lending conditions are being felt by a number of Australian businesses.

"The reduction in capital investment and inventories expectations is a sign that Australian executives believe credit will continue to be tight in the coming quarter," Christian says.

"Given one in five businesses consider access to credit to be the most important influence on their business in the quarter ahead executives will be watching the RBA’s interest rate plans very closely in coming months," she says.

Despite falls across a number of indices, Christian says Australian executives have generally improved their outlook in 2010.

"The critical factor now is how significantly tightening financial conditions will impact the growth plans of Australian firms and what executives will do to address these challenges."

Selling price expectations have fallen by four points to an index of 15.

One in five (23 percent) firms expect to raise prices in the September quarter, while eight percent expect to lower prices.

Profit expectations, also fell slightly but remain strong.

Although down one point on the previous quarter, the profits index is at its second highest level in five years, and 73 points higher than the trough in of the June quarter 2009.

Almost a third of respondents (30 percent) expect their profits levels to increase in the September quarter.

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