Employment & inventory expectations drop to new lows
7 April 2009
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The latest D&B National Business Expectations Survey shows�
Outlook for the June quarter 2009
- Sales and profits expectations continue to dive, 57% of firms anticipate declining sales and 64% expect declining profits
- Selling price expectations have eased slightly however three in four businesses (74%) expect to raise prices in the June quarter
- The employment growth indicator has dropped to the lowest level recorded by the survey
- Capital investment expectations have declined further, with 12% of firms expecting to decrease capital investment
Impacts of the Aussie dollar, credit market and petrol prices
- Less than seven in ten (67%) firms have been negatively impacted by recent movements in the Australian dollar, a fall of 7% in one month
- Recent changes in credit market conditions have negatively impacted a net 47% of firms (51% negative and 4% positive)
- Forty three per cent of executives indicate that recent movements in petrol prices have positively impacted their business, down 10% in two months
Issues expected to influence operations in the June quarter 2009
- Forty eight per cent of executives rank interest rates as the primary influence on their business in the June 2009 quarter, a decrease of 10% since February
- A rise of 6% has 20% of firms ranking petrol prices as their primary concern
- Just 16% of executives expect wages growth to be their primary concern
Actual for December quarter 2008
- Forty nine per cent of firms experienced lower sales, up 9% on September quarter
- Sixty three per cent of firms recorded lower profits, up 8% on September quarter
- Sixty six per cent of firms raised selling prices, unchanged on the September quarter
- The employment index moved 10 points further into negative territory
- The capital investment index fell four points to -7
Global and domestic stimulus plans have not yet shifted business expectations as executives continue to report a negative outlook for profits, sales and capital investment and employment expectations deteriorate even further.
The data is from the latest D&B Business Expectations Survey which shows that all key indices, excluding selling prices, remain deep in negative territory with little sign that executives are preparing for an upturn any time soon.
Fifty-seven percent of firms anticipate declining sales and 64 percent have the same expectation for profits. Expectations for employment and capital investment are following the same downward trend, with 28 percent of firms expecting to cut back on staff and 12 percent anticipating a need to decrease capital investment.
In a further sign that businesses continue to have a downbeat outlook, expectations for inventory growth are at the lowest level since the 1991 recession signalling that executives plan to cut back on existing stock and wait and see before replacing it.
Selling price expectations rose by 30 percent in the nine months from March quarter 2008 to December quarter 2008 and hit their highest level ever recorded in the March 2009 quarter. Expectations have dropped back 5 percent for the June quarter, however three in four (74 percent) firms expect that they will raise prices.
D&B Expected Sales, Profits, Employment and Capital Investment Indexes
Changing credit market conditions and a falling Aussie dollar continue to impact firms, with more than five in ten (51 percent) businesses negatively impacted by the credit market and two in three (67 percent) hurt by the falling value of the dollar. Wholesale businesses have reported the largest swing, with 43 percent indicating a positive impact in July and 81 percent now noting a negative affect of the dollar.
Downward movements in petrol prices have shown through with a decline since September of 92 percent in the number of executives negatively affected by fuel costs. Fewer than 2 percent of firms now report a negative impact while 43 percent report a positive affect.
Dun & Bradstreet CEO Christine Christian believes the most recent data is a sign that while executives are broadly supportive of government stimulus plans they are yet to witness real benefits and don't expect to for several months.
"The Government's stimulus packages are critical to providing support for business. However, the deteriorating outlook, particularly for employment, is a sign that no one expects the benefits to be realised immediately and that things are likely to get worse before they get better", said Ms Christian.
"The deteriorating outlook for inventories is a clear sign that executives are adopting a wait and see approach as they seek to tightly manage costs."
The pause in the reductions in the official cash rate in March has impacted executives' views on the issues that will influence their operations most in the June 2009 quarter. Forty eight per cent of executives now rank interest rates as the primary influence on their business in the quarter ahead, down from 58% in February.
Lower fuel prices have also had an impact on Australian firms. Twenty per cent of executives anticipate that fuel prices will have the most significant influence on their operations in the June quarter, up 6% in one month. Meanwhile 16% of firms rank wages growth as their primary concern, an increase of 2% since February.
According to Dr Duncan Ironmonger, Dun & Bradstreet's economic consultant, the latest ABS data on retail sales and building approvals give mixed signals about the direction of the economy.
"Therefore, although the Reserve Bank has room for more cuts in interest rates, it is likely to leave rates unchanged this week. Housing interest rates and business lending rates are at historically low levels. The dramatic cut of 400 basis points in official rates will continue to have positive effects on consumer spending and housing construction over the months ahead," said Dr Ironmonger.
"In addition, the Government's second stimulus package this month will boost household spending and further stimulus will follow from the subsequent boost to public infrastructure spending.
The D&B index for expected sales is down 9 points to -48, with 9% of executives expecting an increase in sales and 57% expecting a decrease. The profits index is down 10 points to -57, with 7% of executives expecting profits to rise and 64% expecting a fall.
Employment expectations are down 12 points an index of -26, with 2% of executives expecting an increase in staff and 28% expecting a reduction. Capital investment expectations are down three points to an index of minus ten, with 2% of executives expecting an increase and 12% expecting to cut spending. Inventories expectations are down five points an index of -18.
The selling prices index is down five points to an index of 70, with 74% of firms expecting to raise prices and 4% expecting to decrease them.
For further information, or to arrange an interview, please contact:
Nathan Williams
D&B Corporate Affairs Manager
(07) 3360 0635
About the Survey
D&B Australasia conducts latest Business Expectations Surveys every month. Each quarter over 1,200 business owners and senior executives representing major industry sectors across Australia are asked if they expect increases, decreases or no changes in their upcoming quarterly Sales, Profits, Employment, Capital Investment, Inventories and Selling Prices. Since its introduction in Australia in 1988, the survey has proven to be a highly reliable measure of economic performance.
Note: The index figures used in the survey represent the net percentage of survey respondents expecting higher sales, profits, etc., compared with the same quarter of the previous year. The indices are calculated by subtracting the percentage of respondents expecting decreases from the percentage expecting increases.
About D&B
D&B is the world's leading provider of business-to-business credit, marketing and purchasing information and receivables management services. D&B manages the world's most valuable commercial database with information on more than 130 million companies.
Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than one million times daily as part of D&B's commitment to provide accurate, comprehensive information for its more than 150,000 customers.
The Australasian operations were bought out by the senior management group in August 2001. It was the first MBO of a wholly owned subsidiary in D&B's history worldwide.
Today Lazard Carnegie Wylie owns an approximate 90% stake in DBA and the local management team a 10% stake.
Strategies for future growth include developing DBA's commercial and consumer credit referencing business; expanding its receivables management outsourcing business; maintaining its lead in the development of unique credit and risk scoring products; and developing new products specifically tailored to the Australasian market. DBA currently employs over 500 people in Australia and New Zealand.
