By Aimee Chanthadavong

Despite the current tough trading environment, retailers were the only sector to report a positive outcome in December quarter sales, according to the latest Dunn & Bradstreet national business expectations survey.

Dun & Bradstreet CEO Christine Christian said this was possible because retailers have relatively robust sales expectations although selling price expectations indicate this is a result of discounting.

“So while the retailing environment remains challenging overall, executives within the sector remained upbeat about the sales price expectation being set at a net index of 14, which is below the overall average of 17 – but this is well into positive territory,” she said.

“But having said that, these sales expectations are supported by discounting and this was evidence as retailers have had the ability to life sales in the June quarter. So while the sales will also be there, they will have to continue the discounting approach for some time as it is working for retailers.

“And while it may be challenging, Christmas is generally a strong retail period where people have a high disposable income. And as unemployment is still at a low of 5 per cent and we’ve got wages creeping up then people will continue to spend on a relative basis. Whether they are going to be caution the answer is yes.”

The lowered selling price expectation indicates that retailers have lower expectations on average of a capacity to increase selling prices in the June quarter and these expectations have dropped 16 percentage points over the last two quarters.

However, this strategy appears to be working in the short term with the December quarter actual sales index for retailers in positive territory at a net index of six. 

The latest business expectations survey also reveals that 47 per cent of executives see that a continuing strong Australian dollar will have a positive impact on their business in the quarter ahead – for 18 per cent a significant impact. Only 11 per cent expect a high dollar to have a negative impact; for 42 per cent it will have no impact.

Overall, the survey suggests a robust economic outlook.  While there is clearly a general easing in sentiment most indices are at five year highs. However, a tight labour market and events such as the Queensland floods are likely to impact performance.

According to Christian, a few things need to occur before the retail sector will be seeing a more positive outlook.

“I think because there’s a lot of uncertainty around interest rates, in particular, and until there is more certainty in the economy generally then consumers will continue to take advantage of the fairly heavy discounting that is being deployed,” she said.

“We’ve had the weather issues in Queensland that couldn’t have happened at a worst time in terms of confidence because towards the end of last year, economic conditions were looking positive as there was low unemployment and the RBA had halted interest rate rises.

"Unfortunately now, we’re going to see easing expectations because of the flood and cyclone. I’m afraid that’d be probably become a trend for the next year. It just means caution will be exercised rather a more enthusiastic approach.”

D&B Australasia conducted the latest business expectations survey in December 2010. Each quarter 1,200 business owners and senior executives representing major industry sectors across Australia are asked if they expect increases, decreases or no changes in their upcoming quarterly sales, profits, employment, capital investment, inventories and selling prices.