Business confidence on the rise

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New research from Dun & Bradstreet points to a renewed sense of confidence among businesses, with improved expectations for sales, profits and employment in the December quarter.

The company’s latest Business Expectations Survey increased by 17.9 points for the December quarter, up from 12.3 points in the September quarter.

Profit expectations posted the biggest leap, increasing from 9.4 points to 21.7 points, while sales expectations rose from 21.4 points to 28.7 points. 

Employment expectations grew from 8.2 points to 13.6 points, with selling prices lifting slightly from 9.2 points to 9.5 points.

Both the profit ands and employment expectations indices are at their highest levels for the year.

However, capital investment expectations fell from 10.3 points to 7.3 points.

“There has been an impressive and welcome surge in business expectations in the post-election period,” notes Stephen Koukoulas, economic adviser to Dun & Bradstreet. “Expected profits, employment and sales have all jumped sharply, which bodes well for the economy over the second half of 2016.”

In other expected results for the December quarter, more than half of businesses (57.3%) are more optimistic about growth in the next 12 months compared to 2015, while 31.1% are less optimistic and 11.6% are undecided.

Businesses indentified the biggest barriers to the growth in the year ahead as utilities and operational costs (15.6%) and weak demand for products and services (15.4%).

More than three quarters of businesses (78.8%) do not plan to seek finance or new credit in the December quarter to fund growth, while 14.2% anticipate doing so and 5.3% are undecided.

The top issue expected to influence operations in the quarter is consumer confidence (30.8%), followed by cash flow (14.4%) and the level of the Australian dollar (12.7%).

Interestingly, just over half of businesses said the federal election result would have no impact on their business, while 19.2% believe it will have a positive impact, 11.3% expect a negative impact and 14.2% are undecided.

“The RBA will be pleased to see the improvement in business expectations, even though it is still likely to cut interest rates further to help ensure the positive tone in the business sectors translates to a stronger economy over the remainder of 2016 and into 2017,” adds Koukoulas.

The survey also reveals actual results from the June 2016 quarter, with employment, sales and profits all improving, while capital investment and selling prices fell:

·      Actual employment increased from 2.3 points in the March quarter to 5.3 points in the June quarter

·      Sales activity grew from 12.7 points to 13.3 points

·      Actual profits leapt from 1.1 points to 9.1 points (the highest level since 2015)

·      Capital investment fell from 8.2 points to 6.1 points

·      Selling prices dropped from 8.4 points to 5.4 points.

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