12 December 2006
Inflationary pressure to continue into New Year
The latest D&B National Business Expectations Survey shows...
Outlook for March quarter 2007
- More than half (53%) of business executives expect to raise selling prices
- More than one third (36%) of business executives expect to see a decrease in profits compared with March quarter 2006
- Third consecutive quarter of negative expectations for growth in sales, profits, employment and inventories
Petrol Prices
- Recent falls in petrol prices have had a positive business impact on more than half (51%) of all firms
- The importance of fuel prices as an influence on business operations has dropped from 75% to 40%
Pre-Christmas Spending
- Only 8 per cent of executives believe that 2006 pre-Christmas spending will have a greater positive impact on their business than 2005 pre-Christmas spending, with 19% believing it will have a negative impact
Actual for September quarter 2006
- Continued negative performance in sales, profits and employment growth
- Further sharp rise in selling prices for the first quarter of the 2006-07 financial year
- Capital investment started 2006-07 financial year on a flat note
Download the Dec-06 detailed survey's results.pdf (313KB)
Media Release
As 2006 draws to a close, business has bleak expectations for the approaching March quarter '07, with inflationary pressure set to remain and both the sales and profits outlook continuing on their downward spiral. According to the latest Dun & Bradstreet (D&B) Business Expectations Survey, this comes despite the positive impact of recent falls in petrol prices.
The November survey, released today, reveals that over half (53%) of business executives expect to further raise their selling prices in the March quarter 2007. More than one third (36%) of business executives expect to see a decrease in profits compared with March quarter 2006.
The Sales outlook remains dreary, with approximately one third (32%) of executives expecting a decrease in sales compared with the 2006 March quarter. For the quarter ahead, employment expectations also remain extremely weak, with more than one in ten (11%) expecting to decrease staff numbers.
Expectations for pre-Christmas spending have slightly improved however still remain low, with only 8 per cent of executives believing that it will have a positive impact on their business. Compared with 2005 a greater number of executives (19%) expect this year's pre-Christmas spending to have a negative impact. Almost one quarter (24%) expect no impact and almost half (49%) are unsure of the impact on their business.
According to Christine Christian, D&B Australasia CEO, the recent economic climate is still continuing to cause uncertainty for Australian business, with negative expectations continuing into the first quarter of 2007.
"For many businesses 2006 has been a tough year, with factors such as high petrol prices and interest rate rises putting a large and unwanted strain on overall business productivity."
"With spending expected to be down at Christmas combined with increases in selling prices and negative profit expectations, businesses look to be in for a rocky start to the new calendar year."
"Retailers and wholesalers will feel increased pressure throughout the festive season, with profits and sales expectations particularly low," said Ms Christian.
Despite fuel prices remaining the key concern for Australian business executives, there has been a noticeable decline in its level of importance compared to previous months. In November only 40 per cent continue to expect fuel prices to have the most significant impact on business operations in the coming quarter (down from 70% in October). More than one in five (21%) executives now expect wages and salary growth to be the most significant cause for concern, up from 12%. Just over two in ten (22%) of executives are also now concerned with interest rates (up from 4% in October).
D&B Economic Consultant, Dr Duncan Ironmonger, said that the D&B Business Expectations surveys over the last six months had painted a dismal picture of the Australian business landscape and had given an insight into the uphill battle now facing many executives moving into the March quarter.
"With all sectors still expecting negative growth across the board, it will be some time before we see an end to the after-effects caused by the shifts in the Australian economy."
"Last week, despite lingering concerns about inflation and in view of growing uncertainty about the strength of the economy, the Reserve Bank decided to leave official interest rates unchanged. This was a judicious decision as the November increase of official cash rates from 6.0 to 6.25 per cent was still having a negative effect on business."
The latest national accounts figures from the Australian Bureau of Statistics show a slowing economy, with a trend rate of real growth for the September quarter of only 0.4 per cent, less than half of the average rate over the last 15 years. "The D&B surveys indicate this rate will be even lower in the current December and coming March quarters," said Dr Ironmonger.
The D&B index for expected sales is down 9 points to minus 12, with 20% of executives expecting an increase in sales and 32% expecting a decrease. The profits index is down 6 points to minus 20, with 16% of executives expecting profits to rise and 36% expecting a fall.
Employment expectations are down one point to an index of minus five, with 6% expecting an increase in staff, and 11% expecting a reduction. Capital investment expectations are down three points to index of minus two, with 4% expecting an increase and 6% expecting to cut spending. Inventories expectations are down six points to an index of minus 11.
The selling prices index is up eight points to an index of 46, with 53% of firms now expecting to raise prices and 7% expecting to decrease prices.
For further information, or to arrange an interview, please contact:
Danielle Woods
Media
Hill & Knowlton
(02) 9286 1258
Christine Christian
CEO
D&B Australasia
(03) 9828 3146
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.
