10 May 2005
Prices up, confidence down, as businesses face up to slower economy
The latest D&B National Business Expectations Survey shows...
Outlook for September quarter 2005
- Expected increases in selling prices hit a two year high - 42% of businesses expect to raise prices
- Outlook for employment growth weakens, adding to a flat outlook for all other indicators
- Sales and profits growth expectations continue to slide downwards
- Lowest capital investment growth expectations in more than a decade
- Inventory expectations at lowest level in two and a half years
Actual for March quarter 2005
- Selling prices continue to climb to their highest level in three years
- Employment growth drops back below expectations
- Sales and profit growth continues to slide
- Capital investment growth the weakest in more than three years
Media Release
As the Treasurer prepares to bring down his 10th Federal Budget, Australian businesses are bracing for a difficult start to the new financial year, according to the latest D&B Business Expectations survey, released today.
Inflationary pressures are still very much in evidence, driving businesses to increase selling prices. At the same time, a slump in job growth has now joined falling sales and profit growth as another negative in an increasingly subdued business picture.
The businesses surveyed, which only last month appeared to be bullishly optimistic about the market's capacity to bear continuing increases in selling prices, will be watching closely to see how this week's Budget impacts on increasingly negative factors such as capacity constraints, skill shortages and softening retail demand.
"Australian businesses do seem to be facing up to a much more difficult operating environment," the CEO of Dun and Bradstreet, Christine Christian, said. "I have commented before on their resilience in the face of challenging circumstances, but this month's results show businesses heading into a new financial year with a set of fairly grim expectations."
"Their expectations of sales and profit growth continue to trend downwards, and anticipated capital investment has fallen to its lowest level in more than a decade," Ms Christian said. "When you also see jobs growth expectations dipping below the current conservative level, you realise that the business climate looks increasingly inhospitable to many Australian companies."
The downturn in business expectations was most pronounced in the durable manufacturing sector, which also showed dramatic decreases in actual sales and profits during the past quarter. Growth figures for sales, profits and inventories all tumbled for wholesalers as well, and this was reflected in decreased growth expectations for retailers.
"Businesses still appear to be intent on protecting their margins by pushing selling prices higher," Ms Christian said. "However, the market is already signalling that demand is softening in many sectors, and it seems unlikely that businesses can sustain these expected pricing levels."
"The survey provides a fascinating snapshot of Australian business at this moment in time - with a sluggish bottom line and no confidence about increasing inventory, staff or investment in the business. In this context, the optimism about higher selling prices is starting to look like chasing the proverbial silver lining in a sky full of gathering storm clouds."
Actual selling prices have now risen above expectations for eight consecutive months, with more than 40% of businesses anticipating further rises in the September quarter. With the indexes for growth in employee numbers now also slackening along with sales, profits, capital investment and inventory growth, selling prices are the only rising trend in the survey.
D&B Economic Consultant, Dr Duncan Ironmonger, said the soaring selling price indexes indicated inflationary pressures in the economy, which might drive a further interest rate rise.
"Some members of the Reserve Bank Board would probably like to see a further rise or two in the cash interest rate," Dr Ironmonger said. "The moderating effect on inflation of lower import prices over the last three years has come to an end, and high world prices for oil and steel will continue to have an inflationary effect on Australia's consumer prices."
The survey showed that more businesses were expecting a negative impact on their business as a result of a rise in interest rates. About 37% of all businesses now think a quarter percentage point rise would be negative, but the majority (60%) still feel that a rise in rates would have no effect.
The D&B index for expected sales has fallen two points to 11, with 35% of executives expecting an increase in sales and 24% expecting a decrease. The profits index is down by one point to 9, with 33% of executives expecting profits to rise and 24% expecting a fall.
Employment expectations are down two points an index of four, with 15% expecting an increase in staff, and 11% expecting a reduction. Capital investment expectations are also down two points, to an index of one, with 7% now expecting an increase and 6 % expecting to cut spending. Inventories expectations are unchanged at an index of one.
The selling prices index is up three points to an index of 31, with 42 % of firms now expecting to raise prices and 11 % expecting to decrease prices.
For further information, or to arrange an interview, please contact:
Danielle Woods
D&B PR Manager Australia & New Zealand
(02) 8270 2926
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.
