D&B Reports on National Business Expectations

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.

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