Business operators worry about sales outlook as interest rates bite

Rising rates, patchy sales growth and concerns about the fading impact of stimulus measures has resulted in a slight dip in sales expectations among Australian business operators for the June quarter, according to new data from credit agency Dun & Bradstreet.

D&B’s quarterly expectations survey shows a slight fall in sales expectations among executives, with the index measuring sales falling 15% to 28 index points. The survey shows 39% of firms expect sales to increase in the June quarter, while 11% are bracing for a fall.

However, there are signs that expectations still remain a fair bit in front of actual conditions. During the March quarter, the 29% of the firms surveyed reported a rise in sales against the previous corresponding period, while 25% saw a fall in turnover.

While there is some concern among executives about sales, profit and employment expectations remain extremely strong.

Happily for the Reserve Bank, which has been becoming increasingly concerned about the spectre of inflation, there are signs that upward pressure on selling prices is easing. While one in five firms still expect to increase selling prices in the coming quarter, 5% expect to reduce prices.

Adding weight to the argument that selling price pressures may be decreasing are figures from the March quarter, which showed 8% of firms cut prices, compared to 18% which increased them.

“The reduction in selling price expectations is a positive sign to ease government concerns about growing inflation,” Christian says.

“Given that the RBA has listed rising selling prices as a key trigger for interest rate rises, this may reduce the need for further immediate action by the central bank.”

Any signs that the RBA could be about to lift the finger from the interest rates trigger will be welcome news to business operators – 33% of executives nominated higher rates as the biggest influence on their business in the June quarter.

Other major concerns include wage growth, (23% ranked this as their top worry), fuel prices (17%) and access to credit (17%).

Just like consumers, it appears that businesses are on something of a spending “strike”. The survey found 27% of executives plan to reduce their current business debt levels in the next three months, 16% by a significant amount and 11% moderately.

Only 10% plan to increase debt levels, highlighting both a conservative approach to business investment and on-going issues with credit availability.