7 November 2006
Worst Profits Expectations in 19 Years as New Year Brings Little Hope for Australian Business
The latest D&B National Business Expectations Survey shows...
Outlook for March quarter 2007
- More than half (54%) of business executives expect to raise selling prices
- Almost two fifths (39%) 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
Consumer Spending
- More than one quarter (26%) of all executives and over half (52%) of retail executives have seen signs of a slowdown in spending over the past month
- Just 4% of executives believe that 2006 pre-Christmas spending will have a greater positive impact on their business than 2005 pre-Christmas spending
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 negative note
Download the Nov-06 detailed survey's results.pdf (950KB)
Media Release
The New Year brings bleak expectations for businesses across Australia, with executives recording the worst ever profits and the second worst ever sales outlook since the Dun & Bradstreet (D&B) Business Expectations Survey began in 1988 - lower than during the 1991 recession.
The October survey, released today, also reveals that over half (54%) of business executives expect to further raise their selling prices in the March quarter 2007. Employment expectations remain weak, with more than one in ten (12%) expecting to decrease staff numbers.
Pre-Christmas spending is not expected to bring any joy, with just 4% of businesses expecting it to have a positive impact on their business operations. This compares to 29% expecting a positive impact at this time last year. Looking ahead to the coming quarter, more than half (54%) of all retailers expect pre-Christmas spending to have no impact at all.
Consumer spending on the whole also continues to fall, with just 3% of businesses noting signs of an increase and more than one quarter (26%) seeing signs of a slowdown. Retailers continue to be the hardest hit, with 52% seeing a tightening in spending.
According to Christine Christian, D&B Australasia CEO, the continued slump in business expectations is a reflection of the recent economic climate and a clear indicator that Australian businesses are feeling the strain.
"The continued unease in the economy over recent months is taking its toll on Australian businesses. Fuel prices and the further rise in interest rates anticipated this week, alongside the possibility of another rise at the front end of next year, will also do little to alleviate the pressures.
"The continued increase in selling prices is quite clearly having a negative impact on consumer spending, priming the pessimistic expectations of the festive trading period and fuelling the very low profits outlook.
"Retailers are likely to be hardest hit over the holiday season, as consumers curb their spending in light of further rate rises and price hikes," said Ms Christian.
Fuel prices remain the key concern for Australian business executives. Despite the recent price drop, three quarters (75%) continue to expect this to impact on business operations in the coming quarter. Just over one in ten (12%) of executives are also concerned about wages and salary growth.
D&B Economic Consultant, Dr Duncan Ironmonger, said that the D&B Business Expectations surveys over the last six months had shown widespread difficulties across the core sectors of Australia manufacturing, wholesaling and retailing.
"All sectors reported negative sales and profits growth in the March, June and September quarters of 2006. Looking ahead to the March quarter 2007, all sectors now expect a negative growth in sales, profits, employment and inventories.
"The Reserve Bank's recent and imminent interest rate increases will continue to create problems for these sectors even though the minerals resources boom will sustain overall economic growth in 2007," said Dr Ironmonger.
Manufacturers, retailers and wholesalers can no longer contain cost pressures from high fuel prices. Almost half (47%) of businesses raised their selling prices in the September quarter 2006. More than half (54%) expect to do so in the coming March quarter.
The D&B index for expected sales is down 14 points to minus 17, with 18% of executives expecting an increase in sales and 35% expecting a decrease. The profits index is down 10 points to minus 24, with 15% of executives expecting profits to rise and 39% expecting a fall.
Employment expectations are down three points to an index of minus seven, with 5% expecting an increase in staff, and 12% expecting a reduction. Capital investment expectations are down six points to index of minus five, with 3% expecting an increase and 8% expecting to cut spending. Inventories expectations are down 11 points to an index of minus 16.
The selling prices index is up 11 points to an index of 49, with 54% of firms now expecting to raise prices and 5% expecting to decrease prices.
For further information, or to arrange an interview, please contact:
Jennifer Green
Media
Hill & Knowlton
(02) 9286 1225
Christine Christian
CEO
D&B Australasia
(03) 9828 3540
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.
