Brighter outlook for New Year: D&B survey

The New Year looks set to bring a surge in sales and profits, according to latest Dun & Bradstreet survey

December 7, 2010

The New Year looks set to bring a surge in sales and profits, with Australia’s executives indicating they will deliver solid results in these areas during the first quarter.

The strength of expectations in these key areas is also driving expectations for inventories and employment as firms anticipate a need to replenish stocks and take on new staff to meet the expected demand in sales.

The latest Dun & Bradstreet Business Expectations Survey reveals that expectations for sales during the March quarter 2011 are strong, with 52 percent of firms anticipating increased sales.

Strong sales expectations are flowing through to profits, with this index climbing to its highest level in more than seven years.

A 22 percentage point rise since the September quarter has taken the net index to 34.

Inventories and employment expectations for the New Year are also strong, indicating that firms anticipate a need to replenish stocks and take on new staff to meet the expected demand in sales.

Employment expectations are up four points on the December quarter 2010, taking the net index to 12.

Sixteen percent of firms are planning to increase staff levels during the March quarter, while four percent expect to reduce employee numbers.

A fall of three points has taken the capital investment expectations index to 14, yet despite the fall, the index remains above the figures recorded in the six years from the March quarter 2004 to the March quarter 2010.

The selling price expectations index is down two points to 19.

Thirty percent of firms expect to raise prices during the March quarter, while 11 percent expect to lower prices.

According to D&B CEO Christine Christian, Australian businesses are preparing for solid performances in the first quarter of 2011.

"Local economic conditions and improving levels of business confidence have Australian executives set to deliver strong profits in the New Year," Christian says.

"Surging sales expectations are the driver behind the anticipated increase in profits and if these expectations come to fruition, they will support a healthy rate of GDP growth in 2011," she says.

"The strength of sales expectations is also driving inventories and employment plans, with firms anticipating a need to replenish stocks and take on new staff to meet demand."

However, while capital investment expectations remain relatively strong, actual and expected spending in this area has declined in recent months.

"An increase in capital expenditure would result in improvements in productivity and would consequently support Australia’s long term economic growth potential," Christian says.

The latest Business Expectations Survey reveals that 42 percent of firms expect slow growth in demand to be the primary barrier to growth in the year ahead.

Twenty one percent of firms perceive skilled labour issues to be an issue, 10 percent expect funding to impact their ability to expand and 24 percent don’t see any major barrier to growth (a rise of five percent in one month).

The impact of tighter lending conditions appears to be easing, with just seven percent of executives reporting decreased access to credit in the last quarter.

In addition, the number of firms indicating that access to credit will be the most significant influence on their business in the quarter ahead is 15 percent (up one percentage point since last month).

Meanwhile, 34 percent of businesses rank interest rates as their primary concern, 30 percent consider wages growth to be the major influence on their business and 10 percent believe fuel prices will have the most significant impact on operations in the quarter ahead.

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