Dun & Bradstreet survey predicts tough start to 2009

The latest Dun & Bradstreet National Business Expectations survey shows a grim outlook for the March 2009 quarter. The challenges of late 2008 look set to carry over into 2009, with business executives anticipating further declines in sales and profits as credit market conditions, a volatile Australian dollar and inflationary pressures impact prospects for 2009.

The survey was conducted November 2008, with 1200 business owners and senior executives representing major industry sectors across Australia asked if they expect increases, decreases or no changes in their upcoming quarterly sales, profits, employment, capital investment and selling prices.

Outlook for March 2009 quarter:

• 16% of firms expect sales to increase and 54% expect a decrease;
• 12% of firms expect profits to increase and 58% expect a decrease;
• 82% of firms expect to raise prices and 3% expect to decrease them;
• 6% of firms expect staff increases and 19% expect reductions;
• 10% of firms expect to decrease capital investment and 3% expect to increase it.

Issues expected to influence operations in March 2009 quarter:

• Interest rates are the primary concern for 39% of executives, down 9% from the previous quarter;
• 35% rate petrol prices as the primary influence on their business; up 7% since last month;
• Wages growth is the primary concern for just 14% of executives.

Australian dollar:

• 73% have been negatively impacted by recent movements in the Australian dollar, up 61% from July.

Credit market conditions:

• 48% indicate that recent changes in credit market conditions have had a negative impact on their business, up from 26% last month.

Petrol prices:

• 50% indicate that petrol prices have negatively impacted their business, down from 93% in the September quarter;
• 13% reported a positive impact.

Actuals for September 2008 quarter:

• 67% raised prices, up 7% on June quarter;
• 44% experienced lower sales, down 1% on June quarter;
• 55% recorded lower profits, up 2% on June quarter;
• Despite a 5-point rise on June quarter 2008, the employment index remains in negative territory;
• Capital investment index fell slightly to an index of -4.

Dun & Bradstreet CEO Christine Christian says that Australia hasn’t escaped the fallout from the global credit crisis and is feeling the effects of a slowing local economy: “The second half of 2008 has been a challenging time for Australian firms. Falling commodities prices have caused the Australian dollar to drop markedly in recent months, forcing businesses to pay more for their imports. On top of this, the global liquidity crisis has also resulted in significant cash flow challenges for some businesses and forced many organisations to postpone growth plans as access to credit has dried up.”

Dun & Bradstreet economic consultant Dr Duncan Ironmonger added that Australia will come through the current global downturn in better shape than most industrial countries: “The federal government and Reserve Bank have the capacity to stimulate economic growth and have indicated that they will use that capacity as necessary throughout 2009.”