Sales and profit expectations hit seven-year high

There is surging optimism among Australian businesses over their prospects in 2011, with research revealing that sales and profit expectations have both hit a seven-year high.

The latest Dun & Bradstreet national business expectations survey found that the profits index for the March 2011 quarter is up by nine points to 35.

The sales index has also risen, up to 41, while the inventories index is also at its highest level since 2003, up by four points to 17.

Employment expectations have edged up by one point, although there are dips in the capital investment and selling prices outlook.

Wages and interest rates remain the top two concerns for businesses in the March quarter, although fuel prices, in third position, are the main concern for 6% more businesses than the previous quarter.

Although Australian businesses are expecting a strong opening quarter of 2011, Dun & Bradstreet says that caution remains over the market.

This is blamed by the report on the continued weakness in the economies of countries outside Australia, as well as concerns over rising interest rates.

Damian Karmelich, director of corporate affairs at Dun & Bradstreet, says: “The confidence of Australian executives continues to grow on the back of improving local economic conditions, however caution is still evident.”

“Australia is proving resilient to poor demand in the other OECD economies and growth is expected to continue at a healthy pace into the New Year.”

“These factors are buoying the confidence of Australia’s executives and accordingly, they are anticipating a surge in sales and profits growth in the New Year. Inventories and employment expectations are also rising, with both indexes now above pre-crisis levels.”

“However, a fall in the capital investment index indicates that caution remains front of mind for businesses. A rise in the actual and expected indexes should follow later in the year once executives have recorded solid results and are confident they have the capacity to commit funds to investment.”