As consumers continue to deleverage, it’s weighing down retailers, wholesalers and manufacturers, resulting in the decline of business expectations, according to the Dun & Bradstreet Business Expectations Survey, which examines expectations for the June quarter of 2011.

The report higlighted sales expectations are now at their lowest level in almost two years, dropping 14 points to a net index of 17. 

Expectations are particularly weak for the retail sector, which has struggled to stimulate consumer interest even with heavy discounting.  Sales expectations for retailers sit at a net index of 8, which is 9 points below the overall index of 17.

Dun & Bradstreet CEO Christine Christian said the latest results show that consumer deleveraging is becoming an entrenched trend that is primarily impacting retailers but also flowing through to their suppliers in the wholesale and manufacturing industries.

"Heavy discounting by retailers does not appear to be dissuading consumers from paying down their debt and increasing their savings,” she said..

"Retailers now appear to be accepting the permanency of this trend and have adjusted their expectations for the June quarter accordingly.  As a result manufacturers and wholesalers have also lowered their expectations and the consumer effect washes through the supply chain."

The decline in sales expectations is flowing through to the outlook for profits with the overall profits index dropping 17 points to a net index of 13. 
However, while the drop is significant profit expectations still remain well above the 10 year average.

The survey also reveals that retailers have lowered their expectations for price increases signalling that they will continue to keep discounting in an attempt to stimulate sales.