10 October 2006
Economic pressures bite as businesses expect gloomy end to year
The latest D&B National Business Expectations Survey shows...
Outlook for December quarter 2006
- Almost half (46%) of business executives expect to increase selling prices
- Second consecutive quarter of negative expectations for growth in sales, profits, employment and inventories
Fuel prices dominate expectations
- 55% of executives expect the Federal Government's plans to reduce costs of red tape will have a positive impact on their business
Interest rate impact
- 34% of all executives, (43% of retail executives), believe the May and August increases in interest rates have had a negative impact on their business
Income tax cuts
- Just 2% of business executives believe that the income tax cuts in July have had a positive effect on their business
Actual for June quarter 2006
- Continued negative performance in sales, profits and employment growth
- Sharp rise in selling prices for the last quarter of 2005-06
- Capital investment ends 2005-06 financial year on a positive note
Download the Oct-06 detailed survey's results.pdf (345KB)
Media Release
The outlook for Australian businesses heading into the December quarter remains gloomy according to the latest Dun & Bradstreet (D&B) Business Expectations Survey, with businesses expecting a sharp increase in selling prices and lower profits.
The September survey, released today, also shows that businesses expect negative growth on sales, profits, employment and inventories for a second consecutive quarter. The continuing high fuel prices and the impact of the interest rate rises in May and August are significant contributors to this situation.
More than seven out of ten (73%) executives expect fuel prices to remain the key issue impacting their business over the coming quarter, and over one-third (34%) said they had been negatively impacted following the interest rate rises in May and August - an 8% increase on those feeling the strain from the initial May rise.
Income tax cuts have made little impact on businesses, with the majority (69%) believing they have had none at all; retail executives have seen the least impact (83%). Just 2% of all executives have noticed a small positive impact.
The proposed red tape cost cuts however are expected to make a difference to Australian business, with 55% of executives anticipating a positive impact.
Christine Christian, D&B Australasia CEO, said that the outlook for the December quarter suggests that businesses are expecting sustained inflationary pressures.
"We have seen some significant shifts in the economy throughout the year that have unsettled business. With these pressures set to continue, and with a further interest rate rise in November still a possibility, businesses are naturally apprehensive about the future. Consequently, their outlook is more cautious and this is why we are seeing disappointing expectations for the December quarter," said Ms Christian.
Official statistics show that growth in retail sales peaked in March 2006, with slower growth in each of the five months to August. In line with this trend, D&B's September survey showed that just 4% of executives noted signs of an increase in consumer spending, whilst 23% said that they had seen a slowdown. Retailers were hardest hit, with four in ten (41%) seeing a tightening in spending.
D&B Economic Consultant, Dr Duncan Ironmonger, said that the D&B 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 and June quarters of 2006. Looking ahead to the December quarter, only the wholesaling industry expects to see a positive growth in sales. All sectors now expect a negative growth in profits.
"The Reserve Bank's recent increases in interest rates would continue to create problems for these sectors even though the minerals resources boom would sustain overall economic growth in 2005-06," said Dr Ironmonger.
Manufacturers and wholesalers can no longer contain cost pressures from high fuel prices. More than a net one third (35%) of manufacturers and wholesalers put up their selling prices in June quarter. A net 42% expect to do so in the coming December quarter.
The D&B index for expected sales is up one point to minus three, with 26% of executives expecting an increase in sales and 29% expecting a decrease. The profits index is down five points to minus 14, with 22% of executives expecting profits to rise and 36% expecting a fall.
Employment expectations are down two points to an index of minus four, with 7% expecting an increase in staff, and 11% expecting a reduction. Capital investment expectations are up one point to index of one, with 5% expecting an increase and 4% expecting to cut spending. Inventories expectations are unchanged an index of minus five.
The selling prices index is up 16 points to an index of 38, with 46% of firms now expecting to raise prices and 8% 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.
