Rate fears hit sales outlook: D&B

Concerns over future interest rate rises drive sales expectations down to their lowest reading in over two years, survey shows

Rate fears hit sales outlook: D&B
Rate fears hit sales outlook: D&B
August 2, 2011

Concerns over future interest rate rises have driven sales expectations down to their lowest reading in over two years, according to the latest Dun & Bradstreet National Business Expectations Survey.

The outlook for the December quarter reveals sales expectations are down two points to an index of eight - five points below the 10-year average index of 13.

Employment expectations have also fallen two points to -5, while ‘inventories’ is down three points to an index of one.

Meanwhile, an increase of five points has taken the profits expectations index to three and the selling prices index is up four points.

A rise of three points has taken the capital investment index to four, a turnaround of the rapid decline of the previous two quarters and now just one point below the average index (five) of the last 10 years.

Almost one-third of Australia’s executives (32 percent) rank interest rates as the primary influence on their business, followed by wages growth (24 percent) and fuel prices (20 percent).

D&B CEO Christine Christian says the data show that executives expect to maintain profit levels through cost cutting rather than increased sales.

"While rising profit expectations offer some hope the reality is that this will be driven by reduced costs, particularly in regard to labour costs," Christian says.

She says this is most pronounced for retailers and manufacturers.

"Retailers expect sales to remain weak as ongoing discounting campaigns by brick-and-mortar traders prove no match for the rising cost of living and subsequent anticipated rate rises.

"With executives expecting to increase selling prices towards Christmas, the strain on consumers can only worsen and businesses in these key areas of the economy may see a noticeable drop in demand."

The latest Business Expectations Survey shows that 37 percent of executives see that a continuing strong Australian dollar will have a positive impact on their business in the quarter ahead – for 19 percent a significant impact.

Some 27 percent expect a high dollar to have a negative impact; for 36 percent it will have no impact.

Thirty-seven percent of executives indicated that they intend to increase their cash reserves in the next three months – a rise of 12 percent from 25 percent in March, the lowest recorded since this question was first asked in August 2010.

Only 16 percent of executives are likely to seek finance or credit to grow their business in the quarter ahead, with 80 percent not likely and 4 percent not sure.

D&B Australasia surveyed 1,200 business owners and senior executives representing major industry sectors across Australia last month to compile these latest results.

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