Business confidence on the rise: D&B survey


Australia's executives expect a sharp turnaround in sales and profits for the December quarter while employment outlook remains subdued

Business confidence on the rise: D&B survey
Business confidence on the rise: D&B survey
August 10, 2010

Australia’s executives are expecting a sharp turnaround in sales and profits during the December quarter yet their employment and capital investment expectations remain subdued.

The latest Dun & Bradstreet Business Expectations Survey reveals sales and profits expectations have risen substantially since the previous quarter, demonstrating that business confidence is improving as year end approaches.

Inventories are also expected to increase as firms foresee a need to replenish stocks to keep up with demand however, firms are less optimistic about the need to take on new staff.

The sales index has made a substantial rise, climbing seven points to 25.

Forty-one percent of firms expect an increase in sales in the December quarter 2010, while 16 percent anticipate a decrease.

The most significant increase in expectations has come from the durables manufacturing sector where the sales index rose 17 points to 29.

The retailers’ sales index also rose, climbing ten points to an index of 19.

‘SIGNIFICANT’ TURNAROUND

According to D&B’s CEO Christine Christian, there has been a significant turn around in the expectations of Australia’s executives since the previous quarter.

"Six key indicators of business strength tumbled during the previous quarter, with the sales indicator in particular taking a significant dive," Christian says.

"However, the latest survey shows a significant turn around in confidence and expectations as we head towards the December quarter," she says.

"The number of firms expecting to increase sales and profits is strong, which bodes well for the nation’s economic growth in the coming months. However, Australian firms remain cautious on employment and capital investment."

Today’s results signal that there is still a way to go before business returns to the overall levels of confidence and prosperity which existed prior to the GFC, in Christian’s view.

"But, if executives take a long term approach to business management, which includes a strong focus on investment for the future, Australia should be well positioned to accelerate the pace of growth while many other developed nations continue to face economic stagnation," she adds.

SALES, PROFITS INCREASE

Key results show the substantial rise in the overall sales index is flowing through to impact profits expectations.

This index rose from 12 for the September quarter to 17, taking the index back to its highest level in five years.

Almost three in ten firms (28 percent) expect an increase in profits in the December quarter, while 11 percent anticipate a decrease.

Durables manufacturers had the most significant increase in expectations, rising nine points to an index of 16.

Non durable manufacturers and retailers have the lowest expectations for an increase in profits, with the index for both groups at 14.

INVENTORIES, EMPLOYMENT EXPECTATIONS

Firms’ increased sales expectations are also flowing through to inventories, with this index rising since the previous quarter – the index is currently at the second highest level in six years.

Nineteen percent of executives expect to increase inventories, while 11 percent plan to reduce stock levels.

Employment expectations are down two points on the September quarter 2010 –
9 percent of firms are planning to increase staff levels and
6 percent expect to reduce employee numbers.

The strong rise in the sales expectations of durables manufacturers are flowing through to employment intentions, with this group recording the highest index (10) of any sector.

DECEMBER QUARTER WOES

Interest rates remain the
key issue expected to influence operations in the December quarter, with 36 percent of executives ranking this an their
main concern.

Meanwhile, 25 percent of firms expect wages growth to be the primary influence on operations – a fall of 3 percent in a month

Sixteen percent of firms believe fuel prices will be their main concern in the quarter ahead, while 12 percent of firms believe access to credit will be the most important business influence.


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