Businesses expect sales and profit to fall in September quarter

Australian businesses remain wary about the economy and will continue to cut staff and spend less, according to the latest Dun & Bradstreet national business expectations survey.

The survey shows 43% of companies are expecting sales to decrease, compared to the 47% of companies who saw sales decrease in the March quarter.

Additionally, 48% also expect a decrease in profits, compared to the 55% in the March quarter who actually experienced lower profits. Only 15% of companies surveyed expect profits to increase.

But while the downturn is forcing many companies to discount, a good chunk are being forced to raise prices, due in no small part to the weaker Australian dollar. About 60% of respondents expect to increase prices during the September quarter, compared to 57% who increased prices in the previous quarter.

Capital investment expectations also remain low, with 16% of businesses expecting to cut spending, while 22% of companies are expecting to reduce inventory levels.

But there was some good news on the employment front. While 31% of companies say they will continue to reduce staff counts as the downturn drags on, 9% of companies are expecting to increase staff.

Dun & Bradstreet chief executive Christine Christian says there are some pieces of good news despite the negativity in the business community.

“Firstly, it is good that the employment indicator has risen, even though it is deep in negative territory, it has improved somewhat. But about half of businesses expect a decrease in sales and profits, and the big area of concern is that capital expenditure expectations are still very, very low.”

“So what we’re seeing here is that business executives still remain fairly downbeat about the economy and very few are planning on making any form of investment that is backfilling vacant positions. Our survey reveals that Australia’s executives remain largely downbeat.”

Australian companies are also wary of the Federal Government’s financial plans, with only 28% of companies believing the recent budget will have a positive impact.

Credit problems are still heavily impacting businesses, with 53% of businesses surveyed saying credit market conditions are impacting their firms.

Despite the gloomy outlook, expectations in the retail sector have improved beyond other sectors, with the retail sales index jumping 33 points compared to the June quarter, although the index still remains in negative territory.