Despite lingering uncertainty in the current economic environment, expectations among Australian businesses soared to levels that had not been seen in almost 10 years.
According to the latest Dun & Bradstreet national business expectations survey, sales projects among local businesses jumped 29 points to the strongest position since the December quarter 2003. Fifty-four per cent of executives expect sales to increase, while 40 per cent anticipate growing profits over the Christmas period.
The survey also revealed businesses plan to replenish stock levels and increase staff numbers, with expectations for inventories rising 23 index points to be 20 points above the 10 year average. One in five employers also plans to grow staff numbers, well above the average over the last decade.
According to Dun & Bradstreet director Adam Siddique the dramatic improvement in executives’ outlook is a welcome change from recent pessimism, however lingering pressures such as the high dollar will likely weigh on business outlook.
“The buoyant short term outlook is in sharp contrast to recent uncertainty and bodes well for a strong December quarter driven by expectations of solid Christmas trading,” he said.
“This shift was particularly pronounced among retail firms, with sales projections leaping 43 points. This is particularly positive given some retail small businesses have indicated they can generate up to one-third of annual turnover during the December quarter.”
However, 29 per cent of retailers expect the high Australian dollar to have a significant negative impact on operations, up from 14 per cent in June. Likewise, 46 per cent of retailers expect online competition to have a large adverse affect on business performance — up from 21 per cent since June.
“There is a growing awareness among retailers they are operating in a rapidly changing environment, where consumers exercise far greater power than they used to. Access to price comparison websites and cheaper overseas alternatives will continue to impact margins,” Siddique said.
There were, however, indications the outlook may not remain as upbeat, as plans for capital investment remained flat across sectors and fewer executives expect to seek credit to expand their businesses. Eighty-five per cent of executives said they had no plans to finance expansion, up from 70 per cent in June.
Likewise, close to 100 per cent of retail firms have no plans to finance capital investment in the coming months. Ninety-three per cent of retailers will not seek a line of business credit, up dramatically from 68 per cent in June.
“This demonstrates that beneath this optimism there are lingering uncertainties feeding a climate of caution among trade-exposed businesses. Firms will remain focused on the short-term, including maintaining cash flow and other fundamentals, while shying away from long-term investment,” Siddique said.