Australian business confidence slip

Australia’s business outlook for the March 2008 quarter is marred by a drop in sales and profits expectations and concerns about the impact of the tightening credit market. The latest Dun & Bradstreet Business Expectations Survey says that sales and profit growth expectations have fallen for the first time in four quarters.

Retail executives continue to demonstrate the most significant level of concern, with 38% ranking interest rates as the most important influence on operations.

However, pre-Christmas spending is expected to have a greater positive impact than in 2006, with 19% expecting a small positive impact, compared to an expected 8% positive impact in 2006.

The outlook for employment growth has returned to positive territory following negative expectations for the December quarter.

Interest rate concerns remain high, with 25% of executives expecting rates to be the most important influence on their business in the quarter ahead.

Executive concerns regarding the tightening credit market remain unchanged, with 57% expecting it will have a negative impact on operations.

Recent movements in petrol prices have had a negative impact on 64% of businesses, and 19% of executives expect fuel prices to be the most significant influence on operations in the coming quarter.

According to Christine Christian, D&B Australasia CEO, challenges are starting to creep up on Australian businesses following an extended period of positive economic conditions.

“Expectations for sales and profits have dropped after two quarters of strong growth shown by these indicators,” she says. “Executives are also being challenged by the tightening credit market, continued inflationary pressure and expectations of another rate increase in the New Year.

“There is a tendency for executives to relax their management of some functions when economic conditions are strong. Now, as we begin to see some challenges creeping into the market, it is particularly important for businesses to keep a tight rein on operations. This will help to prevent an additional burden in the new year.”

Expectations for capital investment have softened further with the overall index just inside positive territory. However, non-durables manufacturers and retailers are expecting negative growth in capital investment.

Inside Retailing