The business outlook for 2013 is mixed, with Australian executives indicating that sales, inventories, selling prices and employment will fall but investment and profits will rise.
Dun & Bradstreet's latest National Business Expectations Survey reveals that sales expectations have fallen 12 points to an index of 21 however, the index remains that the second highest level in the last eight quarters. This follows September quarter results showing that 43 per cent of firms increased sales compared to the prior year. The inventories index aligns closely with sales, as business executives indicate they will hold back on stock purchases given lower expectations for sales. The index has fallen five points but remains 16 points above the 10-year average index of three.
The selling prices index is down seven points to five, the lowest level since the survey began in 1988 and 24 points below the 10-year average of 29. This result is consistent with ongoing low inflation. At the same time, employment expectations have weakened, moving in line with other forward indicators of labour demand. The index has fallen two points to minus one and is now two points below the 10-year average index. If current trends continue, it is likely the unemployment rate will rise in the months ahead.
Conversely, the profits index has risen four points to an index of 24. It is now at the highest level in eight quarters and is 19 points above the 10-year average index. Capital investment expectations are also up. The index rose two points to 17 and now sits 12 points above the average index (five) of the last 10 years.
According to Gareth Jones, Dun & Bradstreet's CEO, the outlook for the first quarter of the New Year is mixed, with expectations for some key indicators rising while others have fallen back.
"The encouraging aspects of the outlook are the rise in profit and capital investment expectations," said Mr Jones.
"Lower interest rates are likely to be a key factor influencing capital investment expectations, while on the profits front, other input costs rather than stronger sales, are likely to be impacting expectations.
"On the downside, we've seen expectations for sales and employment fall however, expectations are comparatively buoyant, as they remain solid compared to ten year averages."
September quarter actual figures reveal that the sales index rose four points and the profits index was up 15 points. The selling prices index also rose, up eight points to an index of 11, while inventories reached an index of 20.
After a positive run of 14 consecutive quarters, capital investment recorded a negative index of -4. The employment index was also at -4 but remains unchanged from the previous quarter.
According to Stephen Koukoulas, Dun & Bradstreet's economic advisor, businesses are ending the year on a reasonably positive note.
"Overall business conditions remain solid, driven by a rise in net sales and profits during the September quarter," said Mr Koukoulas.
"However, expectations for the quarter ahead are patchy, with a weaker outlook for employment and moderate sales. The most positive aspect of the outlook is a sharp rise in expected profits.
"There has been a sharp fall in expected selling prices, which suggests that inflation could fall further over the near term. The inflation outlook remains a critical element for consideration by the Reserve Bank ofAustraliaand we are likely to see interest rates edge lower over coming months. A softer employment outlook and the prospect of higher unemployment could result in an interest rate cut at this month's meeting."
Petrol prices are expected to have the greatest influence operations during the March quarter 2013. Thirty nine per cent of businesses nominated fuel prices are their primary concern, up 10 points from last month. Interest rates fell by the same amount (10 points), with 23 per cent of executives ranking interest rates as the primary influence on their business.
