The business outlook for 2013 is certainly a mixed bag with Australian executives anticipating that sales, inventories, selling prices and employment will fall but investment and profits will rise.
The latest Business Expectations Survey from Dun & Bradstreet shows that despite sales expectations declining, they remain at their second highest level in two years following a September quarter where 43% of firms increased sales compared to the prior year.
“The encouraging aspects of the outlook are the rise in profit and capital investment expectations,” says Dun & Bradstreet CEO Gareth Jones.
“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.”
Naturally inventory expectations have fallen alongside sales, and sales prices too as retailers embark on some heavy discounting ahead of Christmas. While on the employment front we can expect an increase in joblessness in the current quarter as businesses expect to wind back hiring.
Yet despite this seemingly pessimistic outlook, profit expectations are at two year highs at an index reading of 24 points. To give that some context, the 10 year average is just 5 points.
Similarly, capital investment expectations are on the rise, now 12 points above the ten year average at 17 points. Jones says comparing the results to trend is key to analysing the full set of results.
“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.”
According to Stephen Koukoulas, Dun & Bradstreet's economic advisor, businesses on average 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,” Koukoulas says.
“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.”