Businesses are feeling confident about trading conditions for the upcoming year, following surprisingly positive expectation results during the September quarter.
The upward trend in expectations reflects an anticipated cut in interest rates and a strong sales and profit performance in the manufacturing and wholesaling sectors.
Dun and Bradstreet CEO Christine Christian said a possible interest rate cut by the Reserve Bank (which became a reality yesterday) seems to have boosted confidence, especially in the small business sector.
“Growing positive sentiment and a renewed interest in hiring staff and increasing investment amongst Australian firms indicates a refocus of efforts on growth rather than just survival – if only in the short term.”
Dun & Bradstreet’s latest Business Expectations Survey revealed firms are expecting enhanced performance rates across sales (+11), profits (+2), employment (+7) and investment (+7) for the first quarter of 2012.
With a further 25 per cent drop in the number of firms concerned about impacting interest rates, businesses are showing renewed confidence.
The D&B Business Expectations Survey shows that for the March 2012 quarter:
- Sales Expectations are now at their highest level in twelve months.
- Employment Expectations are also at their highest level in twelve months and are strengthening across all sectors;
- Profit Expectations are showing continued recovery from the first negative index in two years but remain more than 20 points below this time last year;
- Investment Expectations have jumped seven points, sitting significantly above the long-range average; and
- Inventory Expectations have risen a steep 12 points, highlighting improving sentiment in sales expectations.
These figures sit in alignment with recent CPI data, which indicated the decline in prices for discretionary items such as electronics was driving the better than expected inflation result.
Christian said, “It would appear that retailers and manufacturers are unlikely to significantly raise prices any time soon, in part because the higher exchange rate is restricting their capacity to raise prices.”
Dun & Bradstreet’s economic consultant Dr Duncan Ironmonger said the latest D&B Business Expectations Survey is indicative of improving conditions for 2012.
“Despite volatility in international financial markets in recent weeks, current financial conditions in Australia have become easier with bank lending rates for some housing and business loans being reduced. This change has contributed to a more confident outlook,” Ironmonger said.
“The survey shows a welcome pick-up in the expected growth in employment across all sectors. If this is realised and sustained, we may see further favourable moves in the unemployment rate next year.”