Selling price expectations continue to rise
9 September 2008
The latest D&B National Business Expectations Survey shows
Outlook for December quarter 2008
- All indexes except selling prices remain in negative territory
- Sales and profits growth expectations continue to fall, down 42 and 41 points respectively from the highs of the December quarter 2007
- Employment growth expectations are at the lowest point since June 1991
- Capital investment expectations are unchanged at an index of minus seven
- Selling price expectations have climbed six points to an index of 57
Issues expected to influence operations in December quarter 2008
- Concerns about interest rates have risen 5 per cent in one month, with 38 per cent of executives ranking this issue as the most likely to impact their business in the December quarter
- Petrol price concerns have fallen by ten per cent - 37 per cent of executives now rate petrol prices as their primary concern in the quarter ahead
- Rising four per cent since last month, 21 per cent of executives rate wages growth as their primary concern in the December quarter
Tightening credit market
- Seven in ten (70%) executives anticipate that a tightening credit market will have a negative impact on operations, a fall of two per cent from the previous survey
Petrol prices
- Climbing 31 per cent since March, 92 per cent of executives indicate that high petrol prices have had a negative impact on their business
Actual for June quarter 2008
- Growth in sales has declined to the lowest level since the March quarter 1991
- Profits growth was negative and below its previous low in the March quarter 1991
- The employment index was negative and the worst since the June quarter 1992
- Capital investment growth was negative and the lowest since the question's introduction in June 1994
- Selling price rises were up eight points on the March quarter 2008
Australia's business executives are anticipating a further decline in economic conditions in the December quarter as high fuel prices, continued inflationary pressures and a cut back in consumer spending hurt sales and profit margins.
The latest Dun & Bradstreet (D&B) Business Expectations Survey reveals that fuel prices continue to hurt Australian businesses with nine in ten (92%) executives indicating that high petrol prices have had a detrimental impact on operations - a 31 per cent increase since March. Meanwhile 32% of firms have noticed a slowdown in consumer spending in the past month and seven in ten firms indicate that a tightening credit market will have a negative impact on operations.
The December quarter is expected to bring a steep decline in sales, profits, employment growth and capital investment, with all of these indexes remaining in negative territory for the second consecutive quarter. However selling price expectations continue to rise and have hit the highest level in a year (an index of 57) following an increase of 6%. Sixty three per cent of executives expect to raise selling prices in the coming quarter, a clear sign that inflationary pressure will continue at least in the short-term.
Declining sales and profits expectations are a reflection of the poor results experienced in the first two quarters of 2008. The sales index has declined by 42 points since the December quarter of 2007, while the profits index has declined by 41 points over the same period. Forty six per cent of executives now anticipate that sales will decline in the December 2008 quarter while 48 per cent of firms have the same expectation for profits.
The employment index has dropped to its lowest level in 17 years, with 24% of executives expecting to have fewer staff in the quarter ahead than they did a year ago. Just 10 per cent of businesses expect to increase employee numbers.
Capital investment expectations are unchanged at an index of minus seven. Thirteen per cent of firms expect a decrease in capital investment, while just six per cent anticipate an uplift.
According to Christine Christian, Dun & Bradstreet's CEO, the Reserve Bank's decision to cut interest rates should provide a much needed boost to spending and investment and will be welcomed by Australian business executives.
"A slowing economy combined with high funding and goods costs have been eroding the profit margins of Australian businesses for many months now," said Ms Christian.
"As a result we have seen business confidence fall away dramatically and expectations for the coming quarter have hit lows not seen since the 1990s.
"The recent interest rate cut by the Reserve Bank supports expectations that conditions will slow further at least in the short term. Despite this, the rate cut will be welcomed by executives due to its likely flow on effects on spending and investment."
Interest rates and petrol prices continue to lead executive concerns, with more than one third (38%) indicating that interest rates will be their primary issue in the quarter ahead. Retail executives are indicating the highest level of concern, with 45% ranking interest rates as the issue most likely to impact operations in the December quarter.
Meanwhile recent falls in petrol prices have led to a slight easing in executive concerns. Thirty seven per cent of executives now anticipate that fuel prices will have the most significant influence on their operations in the quarter ahead.
Wages growth concerns have increased slightly. Rising four points since July one in five (21%) firms now rate wages growth as their primary concern.
According to Dr Duncan Ironmonger, Dun & Bradstreet's economic consultant, the severity of the current business situation and the gloomy short term outlook is largely a reflection of the squeeze on household finances.
"The latest national accounts show higher mortgage interest rates and rapidly rising prices have forced households to cut real consumption of discretionary items and basic needs such as transport and food," said Dr Ironmonger.
"In 2007 households achieved a positive saving ratio for the first time in six years however they are now struggling to maintain this momentum. Last week's cut in official interest rates will assist household budgets, with flow on effects helping to maintain retail spending and housing investment.
"Despite this expected positive impact, further cuts in interest rates will likely be needed before a widespread recovery in business expectations can occur."
The D&B index for expected sales is down six points to -22, with 24% of executives expecting an increase in sales and 46% expecting a decrease. The profits index is down eight points to -29, with 19% of executives expecting profits to rise and 48% expecting a fall.
Employment expectations are down three points to an index of -14, with 10% of executives expecting an increase in staff and 24% expecting a reduction. Capital investment expectations are unchanged at an index of minus seven, with 6% of executives expecting an increase and 13% expecting to cut spending. Inventories expectations are down one point to an index of -10.
The selling prices index is up six points to an index of 57, with 63% of firms expecting to raise prices and 6% 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.
