Increase in profits but not wages in early 2011

Companies are confident of a surge in sales and profits in the first quarter of 2011 and expect to take on new staff and add to inventories, according to a new survey.

The latest Dun & Bradstreet Business Expectations Survey found expectations for sales during the first quarter of 2011 are strong.

Fifty-two percent of firms anticipate increased sales, while just 15% expect sales to fall, resulting in the highest expected sales index recorded since 2003.

Executives expect the strong sales to boost profits, with the profits index rising to its highest level in more than seven years.

The inventories index is at its second highest level recorded in more than six years, while employment expectations are up four points on the December quarter of 2010.

According to Dun & Bradstreet chief executive Christine Christian, the figures are in line with the economy’s recovery.

“Surging sales expectations are the driver behind the anticipated growth in profits and, if these expectations come to fruition, they will support a healthy rate of GDP growth in 2011,” Christian says.

“The strength of sales expectations is also driving inventories and employment plans, with firms anticipating a need to replenish stocks and take on new staff to meet demand.”

But it’s not all good news, with other data revealing employers are less likely to grant wage increases in the New Year as rising costs take effect.

According to a poll from IPA Recruitment, interest rate rises and increasing utility costs mean employees should not expect or demand a pay rise in early 2011.

According to IPA Recruitment chief executive Tricia Phillips, “Business is telling us that it’s still tough.”

“While conditions are less than ideal, the flipside is that skill shortages have not yet hit and companies are saying they have not yet felt the pinch,” she says.

Phillips doesn’t expect employers to review wage levels until the second quarter of 2011.

“Globally, the economic situation is still strained. While the Australian economy remains strong, we are not isolated from global events,” she says.

“With this in mind we’d be recommending that both employers and employees continue to take a long-term view on employment.”

Phillips says one way in which small businesses can grow – without having to employ additional staff – is by up-skilling their existing staff, particularly by way of government grants such as Victoria’s Skills for Growth.

“The government has made a massive pledge towards up-skilling. Small businesses need to fully understand the [staff] training funding available to them to develop their workforce,” she says.