By Aimee Chanthadavong

As the year draws to an end, business confidence levels are showing signs of stabilisation as the outlook for profits, sales, employment and capital investment start to level out.

Dun & Bradstreet’s latest Business Expectations Survey show that 24 per cent of businesses are anticipating increased earnings in the fourth quarter, with the profits index edging up to 14.9 points, compared to 13.2 in the previous quarter.

The bounce back in confidence is the result of businesses looking beyond the federal election and the effect of lower interest rates and with the dollar easing to around US 90 cents.  Indicative of this is the 15.5 per cent of retailers who expect profit to increase in Q4. This is up from the 10.6 per cent across the full three months looking at Q3 profit expectations.

But while businesses expect to see a pick-up in profit levels, they still remain reluctant to spend with the capital investment index sliding further into negative territory. Also, hiring new employees remains off the agenda.

Gareth Jones, CEO of Dun & Bradstreet, said while it has been a tough first couple of months so far things are starting to look up.

“Our first look at December quarter expectations, however, hints that operating conditions are stabilising along with a lower Aussie dollar and with expectations of a further interest rate cut to stimulate spending,” he said.

“While businesses are not intending to increase investment or employment in the months ahead, and although commercial credit growth is weak, business owners are more confident about sales and profits returning.”

“As we await a period of sustained economic stability, it may be that the conclusion of the election is the event that kicks these initial findings on sentiment from stable to optimistic.” 

D&B’s research also show 38 per cent of businesses are likely to delay significant business decisions and investments until after the election, suggesting there could be a boost in activity to match the traditional Christmas period lift in consumer spending.

“While the economy is not yet strong, the tentative signs of a bottoming or a moderate upturn in most components of the Business Expectations Survey is encouraging,” said Stephen Koukoulas, economic advisor to Dun & Bradstreet.

“With a further interest rate cut and the lower Australian dollar still to show up in economic activity, there is a strong chance that we could see a turning point that could signal a stronger year for the economy in 2014.

“The most positive tone in the outlook is reinforced by the fact that over one-third of businesses are delaying their spending and investment decisions until after the election. “If this spending does in fact transpire after the poll, it will further boost the growth outlook.”