9 October 2007
Business confidence high despite inflationary pressure
Profits growth reaches its highest level in two years
The latest D&B National Business Expectations Survey shows...
Outlook for December quarter 2007
- Sales growth expectations have surged to the highest level in almost three years
- Profits growth expectations are the best in more than two years
- The outlook for capital investment and employment growth is weaker than the September quarter
- Expectations for selling prices are up 3% from the previous quarter - 61% of firms expect prices to be higher than the December 2006 quarter, while 4% expect them to be lower
Interest Rates
- Thirty six per cent of executives consider interest rates to be the most important influence on their business in the quarter ahead
- This is a decrease of 3% since August, but the second highest level of concern recorded by the survey
Stock Market Volatility
- Eleven per cent of business executives expect that recent stock market volatility will have a negative impact on their business, with 2% expecting the impact to be very negative
Petrol Prices
- Recent movements in petrol prices have had a negative impact on 58% of businesses, down 9% in two months
- One fifth (21%) of executives expect fuel prices to be the most significant influence on operations in the coming quarter, down 21% in two months
Wages Growth
- Twenty five per cent of business executives consider wages and salaries growth to be the most important influence on their business in the quarter ahead, up 4% on last month
Actual for June quarter 2007
- Capital investment growth exceeded expectations by one point
- Growth in sales was positive for the second consecutive quarter after four negative quarters
- Selling price rises were six points below expectations
- Profits growth improved but didn't reach positive territory
- After one positive quarter, employment growth returned to negative territory
Download the Oct-07 detailed survey's results.pdf (223KB)
Media Release
Profits and sales growth are at two and three year highs heading into Christmas but inflationary pressure and interest rate concerns dampen the outlook for the December quarter.
According to the latest Dun & Bradstreet (D&B) Business Expectations Survey, the outlook for growth in profits and sales have hit their highest levels in two and three years respectively, with 36% of executives expecting an increase in profits and 40% expecting an increase in sales.
However inflationary pressure is evident with 61% of firms expecting selling prices to be higher in the coming quarter than the corresponding quarter in 2006. Just 4% of executives expect prices to be lower.
Despite an improvement of 3% on last month, interest rates remain a key concern with 36% of executives categorising this issue as the most important influence on their business in the quarter ahead.
Expectations for capital investment have softened however the indicator remains relatively strong with 14% of executives expecting to increase spending in this area. All sectors, including retail, are expecting positive growth in capital investment.
Following one quarter of positive expectations for growth in employment, this indicator has returned to negative territory. Sixteen per cent of executives expect to have fewer staff than a year ago, while 14% expect to increase staff numbers.
Recent stock market volatility is a concern for a small portion of executives, with 11% expecting a negative impact on their business.
The tremors of the US sub-prime fall-out are expected to be felt for several months, however despite this turmoil executive' expectations for sales have continued to rise.
According to Christine Christian, D&B Australasia CEO, the Reserve Bank's decision to keep rates on hold this month will be welcomed by executives.
"Executive concerns regarding interest rates have surged in recent months, overtaking fuel prices as the dominant issue for business executives.
"This trend has occurred amidst the fall-out from the US sub-prime crisis, which has resulted in credit becoming harder to access and more expensive. This environment exacerbates concerns about potential rate increases, meaning the Reserve Bank's decision to keep rates on hold this month will be strongly welcomed by executives.
"However with signs of inflation in the economy, the likelihood of a rate rise prior to Christmas is increasing; I'd expect that concern about this issue will continue at record levels."
Recent movements in petrol prices have had a negative impact on 61% of businesses, down 6% since July. The expected influence of fuel prices on business operations in the quarter ahead has also fallen, down by almost 20% to a level of24% and well below the peak of 82% in July and August of 2006.
The negative impact of the drought has decreased across all sectors, down 11% since April to its current level of 25%. The retail sector has been hardest hit with 34% of executives indicating their business has been negatively affected and 12% rating the impact as very negative.
The continued high level of concern about interest rates places this issue well above executive concerns about wages growth (25%) and fuel prices (21%).
According to Dr Duncan Ironmonger, Dun & Bradstreet's economic consultant, the Australian economy is performing well and the outlook remains positive.
"Although the drought cut half a percentage point off growth in 2006-07, the latest data show that the Australian economy is growing at its strongest rate in more than a decade.
The global outlook is also solid despite a slow-down in the US housing market and the flow-on effects to world financial markets. Only a small proportion of Australian executives expect the recent stock market volatility to have a negative impact on their business," said Dr Ironmonger.
The D&B index for expected sales is up four points to 20, with 40% of executives expecting an increase in sales and 20% expecting a decrease. The profits index is up two points to 12, with 36% of executives expecting profits to rise and 24% expecting a fall.
Employment expectations are down seven points to an index of minus two, with 14% of executives expecting an increase in staff and 16% expecting a reduction. Capital investment expectations are down six points to an index of four, with 14% of executives expecting an increase and 10% 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 57, with 61% of firms expecting to raise prices and 4% expecting to decrease them.
For further information, or to arrange an interview, please contact:
Danielle Woods
D&B PR Manager Australia & New Zealand
(02) 8270 2926
Christine Christian
D&B CEO
(03) 9282 3146
Dr Duncan Ironmonger
D&B Economic Consultant
(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.
