Earnings outlook has hit a 10 year high indicating that business activity may finally improve in the New Year, according to the latest Dun & Bradstreet’s Business Expectations Survey.

The survey shows 36 per cent of companies expect to increase their earnings during the first Q1 2014, which is 34.9 points up from 21.1 in the previous quarter and 22.9 at the same time last year.

The sales expectations index for the first quarter of the New Year has risen to 13.9 points, its highest level in 12-months, with 16 per cent of businesses anticipating increased activity while just two per cent expect weaker trade.

Further supporting healthier profit margins, 18 per cent of businesses plan to raise the prices of their goods and services in Q1 2014, compared to just two per cent that will discount. This result has taken D&B’s selling prices index up to 15.6 points, its highest level since mid-2012.

“Although these are still early days, there’s a clear shift in the near-term optimism of businesses,” said Gareth Jones, CEO of Dun & Bradstreet.

“In recent years we’ve see a temporary improvement in the run towards Christmas, so it’s encouraging to see that the business outlook into early 2014 isn’t tailing off – indeed, there’s a big lift when it comes to profit expectations and a strengthening in the forecast for sales.

“We’ve recently seen the effect of rate cuts on consumer confidence levels through a rebounding property and sharemarket, and it now appears we’re seeing that same positive impact finally filter through to the business sector.

“It appears that the missing pieces for a sustained improvement now lie with credit, investment and employment activity.”

The Survey also found only eight per cent of companies intend to access new finance to grow their operations; an indication that the defensive approach adopted by many businesses this year still prevails. These findings follow official numbers from the Reserve Bank of Australia that show September business credit fell by 0.1 per cent.

In further evidence that caution remains despite an improving business outlook, businesses are split on whether 2014 will be a more prosperous than 2013. While 36 per cent of businesses are more optimistic about growth, the same percentage is less optimistic, with 28 per cent of respondents undecided. The issues most expected to impact growth in 2014 are operating costs, online trading of competitors and unpaid invoices.

In the near-term, however, the business sector is showing renewed confidence about its trading performance as domestic and international economic conditions stabilise.

“The business expectations results are unambiguously good news for the economy,” said Stephen Koukoulas, economic advisor to Dun & Bradstreet.

“There is a clear and quite unmistakable broadening and quickening in the optimism from the business community with low interest rates, a lower Australian dollar and perhaps some post-election optimism encouraging the business sector to ramp up its outlook for profits, sales and selling prices in particular.

“If this more optimistic tone from businesses is sustained deeper into the New Year, economic growth in Australia will be on track to easily exceed three per cent. “Meanwhile, the results on expected selling prices suggest that an acceleration in inflation is possible during the next few quarters.”