12 February 2008
Inflationary pressure persists
Interest rate and petrol price concerns increase
The latest D&B National Business Expectations Survey shows...
Outlook for June quarter 2008
- Expectations for selling prices have increased, with 62 per cent of firms anticipating their prices will be higher in the June quarter than a year earlier
- The outlook for capital investment is stronger with the overall index now at 4 per cent
- Expectations for sales and profits growth have fallen, 36 and 33 per cent of executives respectively expect increases in these indexes
- The outlook for employment growth is slightly weaker but remains in positive territory
Interest Rates
- Thirty nine per cent of executives expect interest rates to be the most important influence on their business in the quarter ahead, an increase of 13% per cent since the previous survey
Tightening Credit Market
- Executive concerns regarding the credit market remain high, with 60 per cent expecting a tightening market will have a negative impact on operations
Petrol Prices
- Thirty one per cent of executives expect fuel prices to be the most significant influence on operations in the coming quarter, up 4 per cent since the previous survey
- Recent movements in petrol prices have had a negative impact on 78 per cent of businesses, with 20 per cent a significant impact
Actual for December quarter 2007
- Growth in sales was the highest since the March quarter 2004
- Employment growth was the best in three years
- Profits growth was flat after one positive quarter
- Capital investment growth was positive
- Selling price rises were four points below expectations
Download the Feb-08 detailed survey's results.pdf (229KB)
Media Release
Inflationary pressure persists and interest rate and petrol price concerns continue to increase according to figures from the latest Dun & Bradstreet (D&B) Business Expectations survey.
Sixty two per cent of firms anticipate that their selling prices will be higher in the coming quarter than the corresponding quarter in 2007, indicating that inflationary pressure is continuing to impact businesses. Just three per cent of executives expect their prices to be lower.
Executive concerns regarding interest rates have increased significantly since the previous survey, up thirteen per cent. Thirty nine per cent of executives now rank interest rates as the most important influence on operations in the coming quarter. Retail executives continue to demonstrate the highest level of concern, with forty five per cent ranking interest rates as the most significant influence on operations.
Fuel price concerns have also increased reaching their highest level in six months. Thirty one per cent of executives now rank the cost of fuel as the most important influence on operations. Meanwhile recent movements in petrol prices have had a negative impact on seventy eight per cent of businesses, a rise of 15 points since December.
According to Christine Christian, Dun & Bradstreet's CEO, evidence of inflationary pressure and the increase in interest rate and fuel price concerns is to be expected.
"The Reserve Bank's most recent increase in the official cash rate has pushed interest rates to their highest level in more than a decade and the major banks are moving quickly to pass this cost to businesses. The sharp increase in executive concerns regarding interest rates is a reflection of this activity," said Ms Christian.
"Fuel price concerns are also valid. The cost of fuel continues to be high and is expected to remain this way for some time.
"Inflationary pressure, interest rates and fuel prices are expected to persist throughout 2008. This means executives need to ensure they are monitoring and managing all aspects of the business that can be controlled."
The tightening credit market continues to be a concern for executives. Despite a decrease of three per cent since the previous survey, executive concerns remain high. Currently sixty per cent of executives expect credit market conditions to have a detrimental impact on operations - this is up on the fifty seven per cent that recorded concern in October and November.
The outlook for growth in profits and sales has declined again from high December quarter expectations. Thirty three per cent of executives expect an increase in profits and thirty six per cent expect an increase in sales. Despite the decline in expectations since the December quarter, sales growth expectations are up twelve points on those for the June quarter of 2007. At thirty two, the net retailers' sales expectations index is especially strong, being eighteen points above the all firms index of fourteen.
Expectations for capital investment have strengthened with the overall net index now at four per cent. Durables manufacturers are showing quite strong growth in capital investment with an index of eleven per cent.
The employment indicator remains in positive territory after one quarter in the negative. Eleven per cent of executives now expect to have more staff in the quarter ahead than they did a year ago, while nine per cent expect to decrease staff numbers.
According to Dr Duncan Ironmonger, Dun & Bradstreet's economic consultant, the Australian economy should continue to do well in 2008.
"The Australian economy should continue to benefit from stronger commodity prices and growth in major Asian economies. As well, business executives are expecting better growth in sales in first half in 2008 than the first half of 2007," said Dr Ironmonger.
"Despite these positives, the rising cost of funds is a major problem for businesses and the Reserve Bank has signalled that it is likely to make a further increase in official interest rates in 2008 if inflation does not abate."
The D&B index for expected sales is down four points to 14, with 36% of executives expecting an increase in sales and 22% expecting a decrease. The profits index is down eight points to zero, with 33% of executives expecting profits to rise and 33% expecting a fall.
Employment expectations are down one point to an index of two, with 11% of executives expecting an increase in staff and 9% expecting a reduction. Capital investment expectations are up three points to an index of four, with 9% of executives expecting an increase and 5% expecting to cut spending. Inventories expectations are down one point to an index of one.
The selling prices index is up six points to an index of 59, with 62% of firms expecting to raise prices and 3% expecting to decrease them.
For further information, or to arrange an interview, please contact:
Danielle Woods
D&B PR Manager Australia & New Zealand
(02) 8270 2926
Dr Duncan Ironmonger
D&B Economic Consultant
(03) 8344 2131
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.
