11 July 2006
Interest rates and fuel prices continue period of business uncertainty
The latest D&B National Business Expectations Survey shows...
Interest rate effects
- The one quarter per cent increase of interest rates in May has had a moderately negative effect on more than one fifth of all businesses
Fuel prices dominate expectations
- Almost 80% of business executives expect that fuel prices will be the dominant influence on their operations in the new financial year
Outlook for September quarter 2006
- Sales and profits growth expectations are negative
- Employment and capital investment expectations are weak
Actual for March quarter 2006
- Negative performance for growth in sales, profits and employment
- Disappointing results after the positive growth in the previous quarter
Download the Jul-06 detailed survey's results.pdf (333KB)
Media Release
Australian businesses continue to feel negative about the economic environment ahead, according to the latest D&B Business Expectations Survey, with both interest rates and fuel prices contributing to the poor outlook.
The latest survey shows that more than one-fifth of businesses (22%) surveyed in June said they had been negatively impacted following the one-quarter per cent interest rate increase in May. Retailers are expecting the strongest impact with 30% of that group reporting negative expectations following the latest interest rate rise.
Should the interest rate rise a further quarter percent point - as predicted by many economists - more than half (52%) of business executives expect it to negatively impact their business. This is surprisingly less than last month when 63% believed their business would be negatively impacted.
The June D&B Business Expectations Survey also indicates that the number of business executives concerned about ongoing high fuel prices continues to grow.
In the latest survey, nearly four out of five (79%) business executives believe that fuel prices would be the key issue influencing their business in the year ahead, compared with 13% for wages growth and 1% for interest rates. In February, fuel prices were of most concern for only 37% of executives. In March this rose to 52%, in April, to 63% and in May to 75%.
D&B Australasia CEO, Christine Christian, believes that the arrival of the new financial year has done little to improve the expectations of Australian businesses for the coming months following the latest survey results.
"There is a climate of uncertainty at the moment. Businesses are continuing to feel the strain of increasing fuel prices and the concern about the negative impact of this is at an all time high," Ms Christian said.
"The results also show that many businesses are holding off on making major business decisions about capital investment and employment looking ahead to the September quarter."
Over the last month, 28% of executives had noticed signs of a slowdown in consumer spending, with only 6% seeing signs of an increase. For retailers, 42% had seen signs of a slowdown and 11% signs of an increase. Results in both these categories show a slight improvement on the situation in May when 33% of all business executives noted a slowdown in consumer spending: with retail executives 44%.
D&B Economic Consultant, Dr Duncan Ironmonger, said whilst the overall Australian economy would experience relatively strong real economic growth of about 3.3% in 2006-07, the D&B survey indicated a particularly poor start to the year for retailers and wholesalers. Sales and profits growth for these sectors are expected to be negative in the September quarter just begun.
"The Reserve Bank's decision to leave interest rates unchanged in both June and July is an indication of its caution in judging the economic outlook,' Dr Ironmonger said.
"While we don't expect another rate rise immediately, we do expect the Reserve Bank to tighten monetary policy again by the end of this year with a 0.25% rate increase. A further 0.25% rate rise is expected by June 2007 and this will take the cash rate to 6.25%," he said.
The D&B index for expected sales is down 17 points to minus four, with 28% of executives expecting an increase in sales and 32% expecting a decrease. The profits index is down 17 points to minus nine, with 27% of executives expecting profits to rise and 36% expecting a fall.
Employment expectations are down four points to an index of minus two, with 12% expecting an increase in staff, and 14% expecting a reduction. Capital investment expectations are down five points to an index of zero, with 7% expecting an increase and 7% expecting to cut spending. Inventories expectations are down five points to an index of minus five.
The selling prices index is down four points to an index of 22, with 34% of firms now expecting to raise prices and 12% expecting to decrease prices.
For further information, or to arrange an interview, please contact:
Suzanne Beaumont
Media
Hill & Knowlton
(02) 9286 1270
Christine Christian
CEO
D&B Australasia
(03) 9828 3333
Dr Duncan Ironmonger
Economic Consultant
D&B
(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.
