Business nervy despite good conditions

Business owners are nervous about interest rates and losing confidence despite reporting a strong outlook for profits and sales, two key surveys released today show.

Speculation about the possibility of further interest rate rises and the international financial crisis appear to have put a dent in the outlook of business managers, with a high 39% reporting that interest rates would the single biggest influence on their business over the next three months according to the Dun & Bradstreet national business expectations survey conducted in August.

Despite the nerves about interest rates, the outlook for growth in sales and profits is the strongest it has been in almost three years, with 42% of executives expecting an increase in sales and 38% expecting an increase in profits over the next three months.

The dramatic increase in concerns regarding interest rates is to be expected given the current economic environment, according to Christine Christian, Dun & Bradstreet Australasia’s chief executive.

“The current credit squeeze has created a global operating environment in which credit availability is tightening and its cost is rising,” she says. “Accordingly, interest rates are having a more marked impact on business operations and executive concerns about further increases are showing through.”

The gap between good conditions on the ground and uncertainty about the future is also reflected in the NAB monthly business survey for August released today, with business confidence diving despite business conditions remaining at a record high.

Despite increases in profitability and forward orders, business confidence dipped two points to remain just 10 points above the line separating good times from bad, the index shows.

Any lack of business confidence has not been reflected in Australia stockmarkets today: at 12.50 pm the S&P/ASX 200 was up 0.7% on yesterday’s close, to 6232.3.