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Sales expectations down, profits up

Sales, inventory, prices and employment will fall but investment and profit will rise, according to Australian executives

December 6, 2012

Sales, inventory, prices and employment will fall but investment and profit will rise, according to Australian executives.

Dun & Bradstreet’s latest National Business Expectations Survey shows sales expectations have fallen 12 points to an index of 21.

This follows September quarter results which revealed 43 percent of firms increased sales compared to the prior year.

The survey shows the inventories index aligns closely with sales, as business executives indicate they will hold back on stock purchases given lower expectations for sales.

The inventories index has fallen five points but remains 16 points above the 10-year average index of three.

According to the survey, the selling prices index is down seven points to five, the lowest level since the survey began in 1988 and 24 points below the 10-year average of 29.

Dun & Bradstreet says the result is consistent with ongoing low inflation.

At the same time, employment expectations have weakened, moving in line with other forward indicators of labour demand.

The employment index has fallen two points to minus one and is now two points below the 10-year average index.

Dun & Bradstreet says if current trends continue it is likely the unemployment rate will rise in the months ahead.

Conversely, the profits index has risen four points to an index of 24.

It is now at the highest level in eight quarters and is 19 points above the 10-year average index.

Capital investment expectations are also up. The index rose two points to 17 and now sits 12 points above the average index (five) of the last 10 years.

Dun & Bradstreet CEO Gareth Jones says the outlook for the first quarter of the New Year is mixed, with expectations for some key indicators rising while others have fallen back.

“The encouraging aspects of the outlook are the rise in profit and capital investment expectations,” Jones says.

“Lower interest rates are likely to be a key factor influencing capital investment expectations, while on the profits front, other input costs rather than stronger sales, are likely to be impacting expectations.

“On the downside, we’ve seen expectations for sales and employment fall however, expectations are comparatively buoyant, as they remain solid compared to ten year averages.”

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