Business expectations back to pre-GFC levels

Aussie Dollars

Businesses have recorded a significant jump in sales and profit expectations for the June 2012 quarter, with sales expectations rising to levels not seen since 2003.

According to the Dun & Bradstreet National Business Expectations Survey, preliminary expectations for sales in the June quarter are up +21 points to an index of 37 and profit expectations are 11 points higher to 19 points.

Sales expectations are now at their strongest level since December 2003, long before the global financial crisis hit.

According to Dun & Bradstreet CEO Christine Christian, the strong sales and profits sentiment is encouraging.

“Historically, leading indicators of financial stability, such as cashflow, have improved during the June quarter as firms gain momentum. We are also no doubt seeing businesses increasingly factoring in the impact of further interest rate reductions on their operations,” Christian said.

Employment expectations fell three points, sitting just two points above the 10-year average and investment expectations have reached a plateau, sitting seven points below the peak seen in December 2010.

Christian says the fall in employment expectations indicates businesses are taking a cautious “wait-and-see” approach on trading conditions before expanding their workforce.

Nearly one-third of businesses reported they plan to increase cash reserves during the June quarter, up seven percentage points since December. Two-thirds also reported they plan to avoid new lines of credit.

“Despite the general improvement in business expectations some caution was still evident through measures of credit growth across a majority of sectors,” Christian added.