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 sales expectations have fallen 12 points to an index of 21. However, the index remains the second highest level in the last eight quarters.

This follows September quarter results which reveal 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.

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.

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,” he said.

“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 actuals reveal 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.

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,” he said.

“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 of Australia and 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.”