Business expectations for June quarter hit record lows

Sales expectations have dipped as businesses continue to struggle with weak consumer spending and the fear of rising fuel prices, according to the latest Dun & Bradstreet Business Expectations Survey.

Every quarter, Dun & Bradstreet surveys 1,200 business owners and senior executives about their business expectations in the upcoming quarter.

The survey, which examines business expectations for the June quarter, reveals significant declines in the outlook across most indices after record highs just six months ago.

According to the report, sales expectations have fallen to an index of 14, the lowest reading in the last seven quarters and just one point above the 10-year average.

Meanwhile, the profits expectations index has plummeted 22 points to eight points, while employment expectations are down six points to an index of three; the lowest level in five quarters.

The inventories index is down nine points to one point, putting it below the 10-year average index, while the capital investment index has fallen eight points to five points.

In the December 2010 quarter, 24% of businesses increased sales compared to the December 2009 quarter, while 18% experienced lower sales.

Dun & Bradstreet chief executive Christine Christian says sales expectations for the June quarter are particularly weak for retail, which has struggled to stimulate consumer interest despite heavy discounting.

“Sales expectations for retailers sit at a net index of six, which is eight points below the overall index of 14. Only non-durable manufacturers have higher sales expectations for the June quarter,” she says.

With regard to the issues expected to influence operations in the June quarter, the survey reveals 26% of businesses believe fuel prices will be their main concern, an 11% increase in the space of one month.

The price of fuel rose by 5.3% in March amid political unrest in Libya, which produces 2% of the world’s oil.

According to Dun & Bradstreet, business concerns about fuel prices are closely followed by concerns about interest rates, with 23% predicting rates will be the primary influence on their business in the quarter ahead.

The survey shows 17% of businesses believe access to credit will be most important influence in the upcoming quarter, up 1% since last month.

Only 14% of executives are likely to seek finance or credit to grow their business in the June quarter, with 82% not likely and 4% unsure.

The survey also reveals 41% of executives believe the ongoing strength of the Australian dollar will have a positive impact on their business in the quarter ahead, with 16% saying it will have a significant impact.

Dr Duncan Ironmonger, Dun & Bradstreet economic consultant, says the Australian economy will recover quickly from the temporary effect of the Queensland floods and cyclones, so businesses need to be prepared for any upswing in spending.

However, the situation in Japan and the Middle East will continue to put a dampener on business expectations.

“The latest D&B survey reveals that the significant reduction in second quarter business expectations for growth in sales and profits has led to a large reduction in capital expenditure,” he says.

“If this continues through the following half of 2011, business will not be prepared for any resumption of household spending.”

“The latest Bureau of Statistics data for February give a positive indication for somewhat better than expected growth in retail sales. Households may be more relaxed about their level of debt and preparing for some increase in spending.”