Businesses still bullish about rising profits and sale in first quarter of 2011 despite retail woes

The poor performance of Australia’s ailing retail sector hasn’t been enough to dent the confidence of Australian entrepreneurs and managers, with 46% predicting sales will increase in the first quarter of 2011, a new survey from Dun & Bradstreet has shown.

The survey also shows business owners and managers are also bullish about the outlook for profits, with 45% expecting profits to rise in the March quarter, and just 15% expecting a decrease.

But rising interest rates remain the biggest concern for companies, with 40% of managers nominating rates as the external factor likely to have the biggest impact on their business in the next three months.

However, in a positive for rates, upwards pressure on selling prices seems to be decreasing, thanks in no small part to retailers attempting to discount their way out of trouble.

Dun & Bradstreet’s economic consultant, Duncan Ironmonger, says it’s a picture that should please the RBA.

“The D&B survey reveals that businesses are maintaining high expectations for growth in sales, profits and employment for the last quarter of 2010 and the first quarter of 2011. It also shows that Australian executives are expecting a relatively low level of growth in selling prices. This follows even lower actual increases in selling prices in the six quarters up to September 2010.”

But while executives might be upbeat about the prospects for 2011, this confidence does not appear to be based on what they are seeing in their business – the gap between business confidence and actual conditions shows no signs of shrinking.

In the September quarter, 34% of firms increased sales, while 20% saw sales fall. It was a similar story with profits – while 24% of firms increased profits, they fell at 18% of businesses.

A big reason for the gap is the poor performance of the retail sector, according to D&B’s director of corporate affairs, Damian Karmelich.

“There is a clear distinction between retailers and the rest in actual performance. The non-retail sector is driving the economy while retailers struggle with household deleveraging,” he says.

“However, for firms engaged in business-to-business trade and exposed to the growth of emerging economies like China the outlook is positive.”

Other positive indicators from the survey include the employment and capital investment indices, which are at their highest points in six years.