Australia | Aug 04 2015
-Jump in sales expectations
-Underpinned by low AUD, rates
-Cash rate likely to be steady?
By Eva Brocklehurst
There is a more optimistic outlook materialising amongst the business community for the December quarter of 2015. The latest Business Expectations Survey from Dun & Bradstreet reveals the sales expectations index at 40.8 points, up from 28.6 points in the preceding quarter's survey. Some 48% of companies in the survey expect an increase in sales in the final quarter of the year.
What has triggered this sharp rebound in business sentiment? It appears to be based on competitive pricing, a lower Australian dollar and favourable borrowing costs, which have offset concerns around weak demand for goods and services and a lack of consumer confidence.
Despite soft demand being the main barrier to growth likely in the 12 months, 61% of respondents were more optimistic about growing their business in 2015 compared with 2014.
The upward trajectory in sales expectations may indicate the recent budget measures for small to medium enterprises are gaining traction, D&B head of corporate affairs, Adam Siddique, maintains. He also suspects discussions about changes to the GST for imported online purchases, as well as the lower Australian dollar, have likely provided a much-needed boost to confidence.
The survey's actual sales price index has risen to 17.6 points from 10.1 in the prior quarter but remains below the 2014 peak of 24.7 points. The survey showed 36% of businesses increased sales in the June quarter while 19% witnessed a drop.
The rise in expected sales is matched to a lesser extent by other key measures in the survey such as the outlook for profits, employment and selling prices. Expectations for capital investment were, overall, flat.
Dissecting the detail reveals sales expectations were not uniformly on the rise. The wholesale sector's sales expectations eased slightly. The retail sector also countered the flat outlook for capital spending with 19.8% of companies forecasting increased capital investment. Also, low interest rates did not translate into increased borrowing expectations in the survey, with just 15.6% of companies planning to seek credit to grow in the quarter ahead.
Economic advisory to Dun & Bradstreet, Stephen Koukoulas, believes record low interest rates and a weak currency are behind the lift in business optimism. He envisages the pick-up in activity through to the end of 2015 will spill over into higher expected profits and a lift in employment as businesses take advantage of the favourable environment. Mr Koukoulas suspects that, in such circumstances, it is likely the Reserve Bank will maintain a steady hand on the cash rate tiller for the near term.
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