Business expectations drop

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The upcoming Federal election and patchy consumer confidence appear to be taking their toll on business confidence, with businesses increasingly pessimistic heading into the September quarter.

The Dun & Bradstreet Business Expectations Index fell to 10.7 points – down from 12.7 points in the March quarter and 17.6 points in the third quarter of 2015.

The Index is the average of the Business Expectations Survey’s measure of sales, profits, employment and capital investments.

With the exception of capital investment, all key survey measures for the September quarter decreased:

  • Employment expectations fell from 8.3 points in the previous quarter to 7.3 points
  • Sales expectations dropped from 23.6 points to 18.5 points
  • Profit expectations decreased from 10.2 points to 7.1 points
  • Capital investment plans increased from 8.7 points to 10 points.
  • Selling price expectations plummeted from 13.7 points to 7.1 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,” says Dun & Bradstreet economics adviser, Stephen Koukoulas.

“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.”

The survey also gauged business’ views on the issues expected to influence operations in the September quarter. Consumer confidence topped the list (35.5%), followed by cash flow (15.1%) and the level of the Australian dollar (13%).

In some positive news, more than half of businesses (55.6%) are more optimistic about growth in the next 12 months compared to 2015, with 34.5% being less optimistic and 9.9% undecided.

The biggest barriers to growth in the year ahead were weak demand for products and services (21.6%) and utilities and operating costs (13.7%).

And more than three-quarters of businesses (77.9%) do not intend to seek finance or new credit to help fund growth, compared to 13.2% that plan on seeking finance and 8.9% that are undecided.

Dun & Bradstreet also measured actual results reported for the March quarter 2016. The Actual Index dropped to a four-and-a-half-year low of 4.1 points – which follows three consecutive quarters of growth.

Actual results for the March quarter are as follows:

  • Actual employment: down from 8.5 points to 0 points.
  • Sales: down from 22.4 points to 9.5 points.
  • Actual profits: down from 8 points to -1.4 points.
  • Capital investment: down from 11.9 points to 8.3 points.
  • Selling prices: down from 11.2 points to 7.6 points.

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