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Survey says business is feeling optimistic about growth

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Published on: Wednesday, June 04, 2014

More than half of businesses are concerned about the impact the Federal Budget may have on their operations according to the Dun & Bradstreet (D&B) Business Expectations Survey for Q3.

Despite 59% of businesses being concerned about the Budget’s impact, 62% are more optimistic about growth in 2014 compared to 2013. Just over one quarter of businesses (29%) are less optimistic, while 9% are undecided.

A slight concern for the economy are the quarterly falls in profits and sales expectations, notes D&B’s Economic advisor, Stephen Koukoulas, “which if realized, point to economic growth remaining only near trend”.

Profit expectations for the September quarter declined to 19.1 points from 20.7 points the previous quarter, while the sales outlook eased slightly to 33.4 points from 33.6 points.

On the upside, employment expectations for the September quarter rose to 11.6 points from 9.2 points the previous quarter; with 21% of business planning to grow their workforce compared to 9% planning to cut staff.

In addition, the capital investment outlook increased to 11.1 points from 10 points the previous quarter.

“Most positive is the expected ongoing lift in employment and capital investment; two critical areas, which are now trending upwards after soft measures in the latter part of 2013,” Koukoulas says.

The key issue expected to influence business operations in the next quarter is cash flow (26%) followed by wages and salaries (14%) and interest rates (12%).

Nearly half of business respondents (49%) would opt to miss supplier payments if struggling to pay their bills on time, followed by a business credit card (15%) and telephone (9%).

By industry, the survey reveals the manufacturing sector’s outlook for profits and sales are at 10-year highs. Nearly half (46%) of manufacturers expect higher profits in the third quarter compared to 15% that expect weaker earnings, while 57% anticipate higher sales compared to 9% forecasting weaker trade.

Wholesalers are also optimistic about business in the upcoming quarter – 43% expect a rise in earning compared to 18% that expect a fall, while 56% anticipate stronger sales compared to 7% who expect lower activity.

However, D&B highlights the upbeat responses from manufacturers and wholesalers have been offset by softer expectations from other industries.

“While the all-industries sales expectations index is flat, at 33.4, the profits expectations index has eased for a second consecutive quarter following a reassessment of earnings from the transportation, communications & utilities; finance, insurance & real estate; services; and retail sectors,” the credit information bureau says.

The retail industry is feeling the heat, with the sector’s profit index falling into negative territory – the first time since mid-2012.

A quarter of retailers expect a fall in earnings, while 21% expect a lift. The retail profits index dropped to -4% for Q3 2013, which is down from 7.7 points the previous quarter.

The drop in earning expectations among retailers reflects the gloomy mood of consumers post-Budget, according to Gareth Jones, CEO of D&B Australia and New Zealand.

“Combined with soft wages growth, and signs from D&B’s Consumer Financial Stress Index that individuals are finding conditions more difficult, it’s unsurprising that many businesses expect to see spending levels fall away.”

However, Jones says despite the slide in expected profits, the general outlook compared to last year is healthy.

“The consolidation of hiring intentions, in particular, indicates there is optimism about the overall direction of the economy.”

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