New Year investment expectations at record high: D&B

Almost a third of Australian businesses expect to boost their long-term investments in the New Year, according to the latest Dun & Bradstreet survey, as firms respond to lower interest rates.

D&B Australasia conducted the latest Business Expectations Survey in October. It shows 31% of Australian businesses expect to boost their long-term investments in the New Year.

Encouragingly, capital investment projections are at their highest level in almost a decade. This follows an overall uptick in actual capital investment over the past seven quarters.

Meanwhile, the projected capital investment for the March 2013 quarter is at 20. This is up five points on the December 2012 quarter and follows an eight-point increase the previous quarter.

The capital investment outlook is now 14 points higher than the 10-year average index of six.

Only 11% of executives increased investment in the March 2011 quarter. But in the September 2012 quarter, that figure rose to 26%.

The figures come after the Australian Bureau of Statistics revealed the economy used 2.6% more capital in 2011-12, which accounted for roughly 90% of real GDP growth.

D&B also attributes improved investment expectations to a series of reductions in the official cash rate this year.

And according to D&B, one in three firms considers interest rates to be the primary influence on their business in the March quarter.

This is up seven points over the past two months, and is ranked above fuel prices and access to credit.

The D&B survey reveals other key business indices are also in positive territory. For example, sales expectations have reached the second highest level in eight quarters, at an index of 23.

This is 11 points above the 10-year average index, according to D&B. Additionally, profits are up two points to an index of 22 – the highest level in eight quarters.

Employment expectations have increased by two points to an index of three while the inventories index is at 20 – the second highest level in 10 years and 18 points above the 10-year average.

Selling prices, however, have remained largely unchanged from December quarter expectations.

The index, which is now at 11 for the March 2013 quarter, is currently just two points above the index of nine for the March 2010 quarter – the lowest level recorded since 1988.

But according to D&B economic advisor Stephen Koukoulas, the rebound in investment expectations is welcome news.

“It suggests that firms are responding to lower interest rates and are taking a more upbeat view of the economy into 2013,” Koukoulas says.

“Those upbeat views on investment are also reflected in the solid level for sales and employment expectations.”

“The favourable outlook for economic growth is complemented by subdued selling prices; a sure sign that inflation pressures are absent.”