Business expectations have slid this quarter, as interest rate worries and ongoing pressure from the strong Australian dollar weighs on local SMBs.
According to Dun & Bradstreet’s latest Business Expectations Survey sales and profit expectations have fallen 11 points for the September 2012, a significant drop from the five-quarter high registered during the June quarter. A quarter of all businesses now believe they’ll see a fall in sales in the coming quarter, and a similar number believe they’ll also see lower profits.
Concerns over interest rates is growing most rapidly in retail and wholesale businesses, with 40 and 29 percent respectively indicating interest rates will have the biggest impact in the coming quarter, up from 17 and 10 percentage points last quarter.
According to Dun & Bradstreet director of business development Adam Siddique, the fall in business optimism is a reflection of economic uncertainty around the world.
“Recent news out of the United States, United Kingdom and Europe is fuelling the current level of uncertainty, as Australian firms consider the potential flow on effects of continued high unemployment, a double-dip recession and possible defaults by countries such as Greece,” he said.
Siddique said pressure from the high dollar and poor consumer spending are taking their toll locally, and a interest rate cute today is doing little to quash business owner’s concerns.
“This is particularly the case for troubled sectors of our economy which may need more than a drop in interest rates to counteract the multitude of downward pressures impacting operations.”
One such sector is manufacturing, which experienced the largest expectations fall, with durables manufacturers recording an 18 point drop in sales expectations and a 20 point drop in projected profit. Similarly, sales expectations among non-durables manufacturers fell 12 points and profit expectations four points.
“The decline in optimism among manufactures is unsurprising given the pressures facing the sector, as well as recent redundancies and companies entering into administration,” Siddique said.
“The sector’s significant fall in optimism brings it more closely into line with the expectations of wholesale and retail firms, which have remained consistently subdued over recent months,” he added.