Employment, sales and profit indexes still deep in negative territory
9 June 2009
The latest D&B National Business Expectations Survey shows�
Outlook for the September quarter 2009
- Capital investment expectations are down again, with 17% of firms expecting to decrease spending in this area
- The employment indicator has risen slightly but remains deep in negative territory - 24% of firms expect to cut back staff in the September quarter
- Sales and profits expectations have improved but remain in negative territory. Forty seven percent of firms expect lower sales while 53% expect lower profits
- Two in three businesses (63%) expect to raise prices in the September 2009 quarter
Impacts of the Aussie dollar, credit market and petrol prices
- Four in ten (41%) firms have been negatively impacted by recent movements in the Australian dollar, a fall of 33% in three months
- Recent changes in credit market conditions have negatively impacted 47% of firms
- More than half (52%) of executives indicate that recent movements in petrol prices have positively impacted their business, up 7% in one month
Issues expected to influence operations in the September quarter 2009
- Forty one percent of executives rank interest rates as the primary influence on their business in September quarter 2009, a decrease of 17% since February
- A rise of 7% has 23% of firms ranking fuel prices as the primary influence on operations in the quarter ahead
- Just 17% of executives expect wages growth to be the primary influence on operations
Actual for March quarter 2009
- Forty eight percent of firms experienced lower sales, down 1% on the December quarter
- Fifty eight percent of firms recorded lower profits, down 5% on the December quarter
- Sixty per cent of firms raised selling prices, down 7% on the December quarter
- The employment and capital investment indexes both fell further into negative territory - the employment index fell four points and the capital investment index fell two points
Australian executives still believe that the immediate future will be challenging despite being one of few developed countries not currently in a recession. Employment, sales and profit expectations have all improved but capital investment confidence is continuing on a downward trend.
These findings are from the latest D&B Business Expectations Survey which shows that business executives are seeing small signs of economic revival despite all but one key indicator remaining in negative territory.
Capital investment expectations remain on a downward trend, with a net 11 percent anticipating a need to decrease spending in this area. Likewise expectations for inventory growth are at the lowest level since the 1991 recession signalling that executives are not yet planning to increase existing stock levels. This reflects March quarter results from the Australian Bureau of Statistics (ABS) which reveal that business investment tumbled by 6.1 percent. If firms continue to reduce business investment this is expected to have serious implications for the employment outlook.
Expectations for employment have made a small upward movement but are still extremely low with a net 24 percent of firms expecting to cut back on staff. Rising unemployment will likely inhibit consumer spending and drag down growth in coming quarters.
Almost two in three (63%) firms expect that they will raise prices in the September 2009 quarter. This potentially could lead to increased inflationary pressures further dampening consumer spending.
The profit index has improved slightly. Despite improving by 17 percentage points, fifty three percent of firms expect their profits to decrease in the September 2009 quarter.
The index for expected sales has followed a similar trend but is still in negative territory, with 47 percent of firms expecting a decrease in sales in the September 2009 quarter. Retail executives in particular have improved expectations since the June quarter, with the index up from -54 to -33. These figures come on the back of ABS data which show that retail figures increased 0.6% in the March quarter, with lower value purchases up by almost 2%.
D&B Expected Sales, Profits, Employment and Capital Investment Indexes
Dun & Bradstreet CEO Christine Christian believes recent data indicate that despite some positive news the road ahead will continue to be challenging for Australian businesses.
"Recent data indicates that Australia has not entered a recession however there are still major challenges ahead. The business outlook is being weighed down by declining capital investment expectations, two out of three firms expecting to raise prices and businesses still planning to cut back on staff," said Ms Christian.
"The critical factor now is how Australian executives respond to this environment. We need to maintain the growth momentum of the March quarter if we are to continue to perform well domestically and by international standards. "
Changing credit market conditions and the Aussie dollar continue to impact firms, with five in ten (51%) businesses negatively impacted by the credit market. With a rise in the AUD in April and May, only 41 percent of firms report a negative impact of movements in the dollar, down from 67 per cent in March. Wholesale businesses still report the greatest impact from currency fluctuations, with 48 percent now indicating a negative impact, down from 81 percent in March.
Downward movements in petrol prices have shown through with a decline since the September quarter 2008 of 92 percent in the number of executives negatively affected by fuel costs. One percent of firms now report a negative impact while 52 percent report a positive affect.
Likewise the influence of interest rates has continued to fall in line with the reductions in the RBA cash rate with 41 percent of firms ranking interest rates as a major influencer on their business, a 17% fall since February 2009. Reflecting declining employment, just 17% of executives expect wages growth to be the primary influence on operations.
According to Dr Duncan Ironmonger, Dun & Bradstreet's economic consultant, the positive March quarter GDP growth shown by last week's national accounts was due mainly to a cut in imports, not an increase in domestic production. Domestic demand is still weak, business investment is declining and unemployment is increasing.
"The D&B survey indicates that after a very bleak June quarter there will be some improvement in the September quarter. In July there is an income tax cut and government infrastructure spending will have an increasing positive impact on jobs and incomes in the quarters to follow," said Dr Ironmonger.
The D&B index for expected sales is up 16 points to -32 with 15% of executives expecting an increase in sales and 47% expecting a decrease. The profits index is up 17 points to -40 with 13% of executives expecting profits to rise and 53% expecting a fall.
Employment expectations are up two points an index of -24, with 8% of executives expecting an increase in staff and 32% expecting a reduction. Capital investment expectations are down one point to an index of -11, with 6% of executives expecting an increase and 17% expecting to cut spending. Inventories expectations are down one point an index of -19.
The selling prices index is down 14 points to an index of 56, with 63% of firms expecting to raise prices and 7% 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 140 million companies.
Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than 1.5 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.
