The results from Dun & Bradstreet’s May Business Expectations Survey have highlighted a continued downward trend in expectations for the three-month period to 30 September 2016. With 35.5% of businesses surveyed believing consumer confidence will have the most impact on operations in the quarter ahead the impending July federal election could be weighing on optimism. However, the Employment Expectations Index showed signs of improvement, with the Manufacturing and Transport, Communication & Utilities sectors reporting a better employment outlook.

Dun & Bradstreet’s Business Expectations Index, the average of the survey’s measures of Sales, Profits, Employment and Capital Investment, has fallen to 10.7 points for the third quarter of 2016, down from 12.7 points for Q2 2016 and 17.6 points in Q3 2015. The figure is 3.5 points above the 10-year average of 7.3 points.

The Actuals Index plummeted to a two-and-half-year low of 4.1 points, compared with 12.7 points last quarter, and bringing an end to three consecutive quarters of growth.

According to Stephen Koukoulas, Economic Advisor to Dun & Bradstreet: “The slide in the Business Expectations Index has continued into May, reaching its lowest level in two and a half years. The ‘actual’ performance of the economy has also weakened, which points to a slowing rate of economic growth in the first part of 2016.”

Koukoulas also noted that “of even more concern is the fact the weakness appears to have continued into the June quarter with expected sales, profits, employment and selling prices all reaching new lows in the current cyclical downswing. The outlook is deteriorating rapidly.”

All indices experienced a decline, with the exception of Capital Investment Expectations, which increased by 1.3 points. The Actual Sales, Actual Profits and Actual Employment indices fell by 12.9 points, 9.4 points and 8.5 points, respectively. However, the Employment Expectations Index has stabilised at 7.3 points, compared to 8.3 points for the first three months of the year.

The Retail sector continues to face a bleak outlook, with its Expectations Index falling to an almost three-year low of 3.1 points after the index plummeted by around 10 points in each of the two preceding quarters. Retail’s Actuals Index fell from 15.5 points to 0.1 points during the same timeframe, driven by sharp declines in Actual Sales and Actual Employment.

The Construction sector also experienced sharp declines, with its Expectations Index falling from 11.3 points to 3.1 points, while its Actuals Index dropped from 10.9 points to -6.9 points. With the exception of Capital Investment, which increased from 3.4 points to 6.1 points, the sector’s Actual Indices for Sales, Employment, Selling Prices and Profits all plunged into negative territory.

Meanwhile, the Manufacturing sector expects better times ahead, with improvements in the sector’s Expectations Indices for Employment, Profits and Capital Investment. Notably, the Employment Expectations Index for Manufacturers increased from 5.0 points to 11.2 points. The sector’s Actuals Index fell slightly from 10.6 points to 9.5 points, primarily due to the decline in its Actual Employment Index from 9.0 points to 2.5 points; this was mostly offset by an increase in its Actual Sales Index from 15.8 points to 21.4 points. The Employment Expectations Index for the Transport, Communication & Utilities sector also jumped, from 6.3 points to 16.1 points.

“The March quarter GDP data released last week confirmed a solid rate of GDP growth, but ongoing weakness in national incomes and falling profits in the Australian Bureau of Statistics data fit with the weakening in business expectations. The relatively good news for the economy seen in late 2015 has turned sharply lower in the middle of 2016, with the focus on the election campaign dominating the news and this is eating away at the business sector”, Koukoulas added.