Bright skies ahead as sales expectations at highest levels since 2003: Survey

Sales expectations among SMEs are at their highest level since 2003, according to Dun & Bradstreet’s latest Business Expectations Survey.

Dun & Bradstreet’s sales index has risen to 36.6 points for the fourth quarter of 2014, well above the index’s 10-year average of 13.08 points.

According to the monthly survey, 46% of SMEs are expecting their sales to increase in the fourth quarter and just 9% expect fewer sales. The remaining 45% expect no change.

SMEs are also optimistic about their prospects for growth this year: 63% of survey respondents reporting they are more optimistic about growth now compared to 12 months ago; 28% said they were less optimistic; while 9% said they are undecided.

Dun & Bradstreet economic adviser Stephen Koukoulas told SmartCompany the results present “quite a nice picture” of the current state of the economy.

Koukoulas believes the rise in expectations and optimism is due to a number of factors, particularly the fact that business was “unduly pessimistic when the budget came down”.

“It was a tough budget, no questions, but the business sector is probably now thinking, we’re doing okay, people are still spending money,” he says.

Koukoulas says the generally strong stock market, higher housing prices and low interest rates are all helping maintain cash flow levels for businesses, and these factors are filtering through to create more optimistic conditions and “solid profitability” across the sector.

While Koukoulas says retail sales were weak in April and May, yesterday’s ABS retail figures for June were reasonably strong.

“We had what I’m calling an ‘air pocket’ in the economy around budget time,” he says. “But in June and July and now coming into August, more normal conditions are prevailing.”

The Dun & Bradstreet survey also found the employment expectations index has also risen for SMEs, to 13.7 points from 12.7 points in the previous quarter, and -1.1 points a year ago.

Koukoulas says this result is one of the highlights of the survey findings.

“Employment expectations are not booming but they are creeping higher,” says Koukoulas, who says employment expectations were “subdued” this time last year.

“If our indications are true, which we believe they are, employment will pick up over the next couple of months,” he says.

Koukoulas says healthy employment expectations are linked to the strong sales expectations, with businesses anticipating a need to hire more staff as their sales improve.

“We want to see this continue,” he says. “These are only expectations and so the next few months will be vital.”

When it comes to which sectors are most optimistic, Koukoulas says services and transport are leading the way.

The service industry sales index has jumped to 52.5 points, up four points from this time last year, while the sales expectations index for the transportation, utilities and construction sector has jumped 8 points to 45.4 points.

Koukoulas says the results reflect “the nature of our economy”, with services continuing to outperform manufacturing.

“More or less that’s been the trend for the last five years and we expect it to continue over the next six months,” he says.