Businesses see growth in profit and sales in first three months of 2010: Survey

Businesses are now expecting growth in sales, profits and capital investment during the March quarter, according to the latest figures from the Dun & Bradstreet National Business Expectations survey.

But employment expectations have declined from positive territory to a rating of zero, indicating the economy will be impacted by higher unemployment rates during the year.

The survey reveals inventory expectations are now at a four-year high, up one point from the December quarter, with 14% of executives expecting to increase inventories in the next quarter. About 9% plan to reduce stock, opposed to 15% which expect to increase inventories.

Additionally, the retail industry has been noted as the most improved sector, with the sector’s index returning to positive territory at three points from its March 2009 low of -12.

Sales and profits expectations have grown two percentage points since last quarter, following a 50 percentage point rise during the December 2009 quarter – the largest one-quarter rise in the survey’s history.

About 43% of firms expect a sales increase, with 15% expecting a decrease. The profit expectations index also grew to 28% of executives now anticipating profits.

Just 12% of firms expect to increase capital investment, with 5% planning to decrease investment spending. Actual capital investment has now recorded two positive quarters, following five negatives quarters between March 2008 to March 2009.

But despite the higher expectations for growth, 31% of companies said credit market conditions are having a detrimental impact on their business. Rising business-to-business payment days are impacting 40% of companies, although this rate has improved to 51.8 days.

About 19% of executives said they plan to reduce current business debt levels in the next three months, with 5% to reduce “significantly” and 14% to reduce “moderately”. Only 7% expect business debt to increase.

D&B chief executive Christine Christian said in a statement the increased outlook for stock levels is a good sign that business outlooks are more positive.

“The increased expectations to boost inventory levels in most sectors is a positive sign that Australian businesses believe that the economic turn around will continue well into 2010. Firms are unlikely to invest in stock if they have little belief that improving sales and profits levels will continue,” Christian said.

“The increase in business confidence is a stark turn around from mid-year when most indices were mired in negative territory. 2009 has been a challenging year for many businesses with the impact of the Global Financial Crisis hitting heavily across Australia and the globe.

D&B economic consultant Duncan Ironmonger also said, despite lower expectations for employment growth, business conditions are set to rise.

“Businesses are backing up these expectations with intentions to make relatively strong increases in capital investment and inventories,” he said. “Partly due to the strong Australian dollar and lower costs of imports, firms have managed to keep selling price increases low and intend to continue this policy into 2010.”

“In the three months to November employment grew by 100,000. Consequently 2009 is highly likely to show four quarters of positive economic growth in Australia – a strong base for more growth in 2010.”