Local firms have registered a sharp decline in confidence off the back of continued global economic uncertainty and financial instability.
According to Dun & Bradstreet's latest Business Expectations Survey, sales expectations fell five points and profit expectations remain flat based on results recorded last month. The drop in sentiment was particularly evident among manufacturers and wholesalers where sales expectations plummeted by more than 15 points since October.
Caution by business is also being reflected through increasing concern over interest rates, despite last month's rate cut, with one third of executives surveyed citing this as their biggest concern heading into 2012.
According to Dun & Bradstreet CEO, Christine Christian, the question of contagion from the escalating situation in Europe is increasingly an issue for Australian businesses, which to this point have felt relatively sheltered from the crisis.
"The sudden drop in business sentiment over the course of the last month, following fairly solid results in October, indicates the degree of volatility that is being felt in the marketplace," Ms Christian said.
"This is obviously being exacerbated, particularly in sectors like retail and manufacturing, by a high Australian dollar and the changing composition of the economy off the back of the mining boom."
The D&B Business Expectations Survey shows that for the March 2012 quarter:
- Although sales expectations are at their highest level in twelve months, since October expectations are down five points, with expectations down 29 points for wholesalers since last month;
- Profit Expectations continue to recover from the first negative index in two years but remain more than 20 points below this time last year. Amongst manufacturers, profit expectations have dropped 4.5 points over the last month;
- Employment Expectations are also at the highest level since January this year, however, since October staffing expectations have fallen across sectors.
- Investment Expectations have risen five points and are now significantly above the long-range average, however, month-on-month have dropped across all sectors except retail.
Of particular note has been the significant increase in the proportion of firms citing access to finance as an issue that will affect their business. This has nearly doubled to reach 14 per cent since the middle of this year.
Not surprisingly, over the same period, the proportion of firms citing access to, or a shortage of funding as the biggest barrier to growing their business, has nearly doubled.
"While results for the quarter to date remain solid, this month's dramatic dampening of sentiment is a warning that local firms are coming up against a number of key growth and productivity challenges," Ms Christian said.
While sales and employment expectations for the quarter to date are at their highest point in 12 months, sentiment remains well down on the first quarter 2011. The profit outlook for the March 2012 quarter remains in the single digits (+7), significantly below levels seen at the same time last year (+30). This is strongly correlated with a weakening in sales expectations by 14 points over the same period.
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