Business anticipating an upbeat Q4

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Businesses are feeling optimistic heading into the final quarter of the year according to Dun & Bradstreet’s latest Business Expectations Survey.

The survey reveals companies are predicting higher sales, profits, employee numbers and selling prices.

Sales expectations recorded the biggest jump – lifting from 21.4 points in Q3 to 30.1 points in Q4. Profit expectations increased from 9.4 points to 17.1 points, with employment expectations up from 8.2 points to 13 points.

Selling prices posted a modest lift from 9.2 points to 9.3 points, while plans for capital investment fell from 10.3 points to 7.9 points.

“Expectations for capital investment remain subdued, which is a concern for the economy given the still unfolding decline in mining investment plans,” says Stephen Koukoulas, economics advisor to Dun & Bradstreet.

As for the ongoing weakness in expected selling prices, Koukoulas notes this is consistent with the low inflation rate.

“[It] suggests that official interest rates will remain very low, at least in the near term,” he adds.

The overall rise in expectations saw the Business Expectations Index increase by 37.1% to 17 points for Q4 2016 – up from 12.4 points in Q3.

Koukoulas highlights the generally positive tone to business expectations has continued, which points to an ongoing solid pace of expansion for the economy over the remainder of 2016.

“The upswing for expected sales, profits and employment has been sustained in the most recent survey, aided, it would appear, by the record low interest rate settings and evidence of policy progress from the re-elected Turnbull Government,” he says.

And in news that bodes well for the retail industry, there was a notable improvement in retailers expecting higher sales, employee numbers, profits and capital investment in the December quarter, following three consecutive quarters of declining expectations among retail businesses.

And as the new year approaches, more than half of businesses (58%) said they are more optimistic about growth in 2017 compared to 2016.

The Services industry was the most confident with 66.7% of companies saying they were more optimistic about growth in 2017, compared to 21.1% who are less optimistic, while just 54.2% of Wholesalers more optimistic about growth in 2017 compared to 2016, while 39% said they are less optimistic.

Top issues expected to influence operations in the December quarter were consumer confidence (35.3%), cash flow (17.3%) and the level of the Australian dollar (10%).

As for potential challenges to growth in the year ahead, 17.5% of businesses see weak demand for their products and services as the biggest barrier, while 13.9% see cash flow as the biggest barrier.

Almost three-quarters (74.9%) do not intend to seek new finance or credit in the December quarter to fund growth, compared to 16.6% that anticipate doing so and 8.5% that are undecided.

Dun & Bradstreet also reveals actual results reported for the June quarter 2016, with lifts in actual employment, sales and profit:

  • Actual employment increased from 2.3 points in the second quarter to 4.6 points in the third quarter
  • Sales activity rose from 12.7 points to 15.5 points
  • Actual profits leapt from 1.1 points to 7.9 points
  • Capital investment activity fell from 8.2 points to 7.7 points
  • Selling prices decreased from 8.4 points to 6.6 points.


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