Australian executives predict business conditions will further deteriorate in the September quarter affected by a slowing economy, spiralling fuel prices and toughened credit conditions, a survey shows.
According to the latest Dun & Bradsheet
(D&B) Business Expectations Survey, fuel prices have hit businesses hard with almost 90 per cent of participants indicating they have had a detrimental impact on operations, a 28% increase in three months. 32 per cent of firms have noticed a downturn in consumer spending in the past three months and 21 per cent have been negatively affected by the strong Australian dollar.
Credit market conditions represented another significant concern. Two-thirds of firms participated indicated that a tightening credit market will have a negative impact on operations, with 11% anticipating a very negative impact.
The September quarter is also expected to bring a steep decline in sales, profits, employment growth and capital investment, with all of these indexes now in negative territory.
Sales and profits growth expectations have fallen sharply, down 36 and 33 points respectively from December quarter highs. Capital investment expectations have dropped 13 points to an index of minus seven, with employment growth expectations at the lowest point since June 1991.
As an exception to the deteriorating conditions, selling price expectations have climbed six points to an index of 51.
D&B CEO Christine Christian said continually escalating costs are eating away the profit margins of Australian businesses.
“Fuel prices are continuing to soar, interest rates remain steady but high and consumer spending is dropping away – all of these factors are squeezing the profit margins of Australian businesses," she said.
“Executives face challenging decisions about how to manage these costs. Moves to increase prices will likely be met by customer backlash however as costs continue to rise and margins get thinner, failure to pass on these costs will have detrimental impacts on profitability.”
The company’s economic consultant Dr Duncan Ironmonger said the economic slowdown in Australia is happening quickly.
“Bureau of Statistics
data for May reveal very weak growth in retail sales and a further decline in the number of new dwelling approvals. The small boost from income tax cuts starting this month will do little to boost consumer sentiment and spending in an environment of high food and petrol prices and high interest rates," he said.
- The D&B index for expected sales is down 31 points to -16, with 25% of executives expecting an increase in sales and 41% expecting a decrease.
- The profits index is down 24 points to -21, with 22% of executives expecting profits to rise and 43% expecting a fall.
- Employment expectations are down 15 points to an index of -11, with 10% of executives expecting an increase in staff and 21% expecting a reduction.
- Capital investment expectations are down 13 points to an index of minus seven, with 8% of executives expecting an increase and 15% expecting to cut spending. Inventories expectations are down nine points to an index of minus nine.
- The selling prices index is up six points to an index of 51, with 58% of firms expecting to raise prices and 7% expecting to decrease them.