Australian Business Expectations Survey

Transcription

1 Australian Business Expectations Survey Dun & Bradstreet Q PRELIMINARY RESULTS RELEASED 1 AUGUST 2017

2 Index UPLIFT IN BUSINESS SENTIMENT Australian businesses are looking ahead to the final quarter of 2017 with renewed optimism, suggesting businesses are becoming more confident in navigating a challenging economic landscape. In Dun & Bradstreet s July Business Expectations Survey, companies forecast a lift in sales, profits, employment, investment and selling prices in the December quarter, and reported improved business conditions in the June quarter. According to Dun & Bradstreet Economic Adviser Stephen Koukoulas: Business expectations across the key aspects of the economic outlook have bounced back solidly, pointing to a lift in economic activity into the latter part of Also encouraging was a rise in the actual performance of the economy in the June quarter, a result that bodes well for the official GDP figures which are released in early September. Dun & Bradstreet s Business Expectations Index, the average of the survey s measures of sales, profits, employment and capital investment expectations, rose to 19.4 points for the December quarter of 2017, up 16.2 percent from 16.7 points from the September quarter 2017, and up 14.1 percent from 17.0 points in the previous corresponding period. The preliminary Q result is 9.9 points above the 10-year average of 9.5 points Business Expectations Index 19.4 pts pts Business Expectations Index Business Actuals Index The Business Expectations Index is an aggregate of the survey s measures of sales, profits employment and investment expectations. One of the most important aspects of the Business Expectations Survey is a sharp and now sustained lift in expected selling prices. For the past two years, underlying inflation (selling prices in other words), has been below the bottom of the RBA target band. This has been the fundamental issue that has allowed the Reserve Bank of Australia to set the interest rate at a record low 1.5 percent, Mr Koukoulas explained. Expected selling prices have jumped in the December quarter, which points to an eventual increase in the official inflation rate over the next few quarters. If this does come to pass, the market speculation about the need for interest rate hikes may become more intense, he said. The Selling Prices Expectations Index for the December quarter 2017 is 21.0 points, up from 17.6 points in the September quarter and 9.3 points a year earlier. The index is currently at its highest point since the June quarter 2015, and 2.0 points shy of its ten-year average of 23.0 points. Some 27.5 percent of businesses expect to increase selling prices in Q compared to Q4 2016, while just 6.6 percent expect to lower prices. This outlook follows an increase in the Selling Prices Actuals Index in the June quarter, with 21.0 percent of companies raising prices compared to the 9.3 percent that dropped prices. The employment outlook continues to improve, with the Employment Expectations Index edging up from 14.2 points to 15.3 points. This should be a positive factor for the economy over the remainder of 2017 and if sustained, will support incomes and therefore household spending, Mr Koukoulas noted. 1

3 Index However, actual employment declined over the June quarter (5.2 points) compared to the March quarter (8.2 points) the only component of the survey to see a quarter-on-quarter decline. The drop-back in actual employment numbers in Q2 confirmed the expected decline in employment for that period seen in earlier issues of the Business Expectations Survey. Following a sharp decline in Q3, profit expectations have picked up for the fourth quarter with the index moving from 16.3 points to 19.3 points. Some 34.4 percent of firms expect an increase in profits for Q compared to Q4 2016, while 15.1 percent expect lower profits. Similarly, the July survey shows turnaround in sales expectations. Actual sales and profits picked up in the June quarter compared to the March quarter; however, both indices are slightly lower compared to the previous corresponding quarter. These were the only components to see a yearon-year decline. Suffice to say, the expectations and actual performance for sales and profits fit with the big-picture scenario of the economy still growing, but not at rapid pace, Mr Koukoulas remarked. The Capital Investment Expectations Index increased quarter-on-quarter as well as year-on-year, as did the Capital Investment Actuals Index. Retail firms in particular recorded a strong increase in capital investment expectations for the December quarter, and to a lesser extent, Services firms and Finance, Real Estate & Insurance firms. The more positive tone from expected and actual investment is likely driven by ongoing low interest rates and stronger performance of the global economy, both of which are very important drivers of business investment plans, Mr Koukoulas said. Of the seven industries surveyed, Wholesale was the only sector to see a decline in Business Expectations Index for the December quarter compared to the September quarter. Wholesalers had the strongest outlook in the June and September quarters with a Business Expectations Index of 25.2 points and 21.7 points respectively, but it has now fallen to fourth place with a score of 16.9 points. 35 Business Expectations - highs and lows Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Wholesalers Retailers Construction Finance, Insurance, Real Estate Construction is in last place at 12.7 points, taking Retail s place at the bottom of the ladder. Retail s Business Expectations Index jumped from 9.3 points to 14.9 points for the December quarter, but its Business Actuals Index sank from -0.8 points to -1.9 points for the June quarter. Finance, Insurance & Real Estate firms have the brightest outlook for Q4, with a Business Expectations Index of 27.0 points, while Services firms were the strongest performers in Q2 with a Business Actuals Index of 21.1 points. The surging cost of utilities is of increasing concern, with Australian businesses now identifying utilities and operational costs as the biggest barrier to business growth. Some 17.4 percent of all businesses identified this as their biggest barrier in the July survey. 2

4 % Businesses based in South Australia are the most impacted by utilities and operating costs: 26.3 percent identify this as their biggest barrier, indicating that South Australia s energy crisis is weighing on businesses despite the state government s recently-announced $550 million Energy Plan. Queensland was close behind at 24.6 percent, followed by the Northern Territory at 23.1 percent. Of all states and territories, West Australian businesses were least concerned about utilities and operational costs (9.4 percent). Businesses operating in the west were mostly concerned about weak demand for products or services (20.3 percent). 18 Companies increasingly identify 'utilities and operating costs' as the biggest barrier to growth Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Some 27.8 percent of South Australian companies believe business conditions in their state are bad (19.4 percent) or very bad (8.3 percent) compared with the rest of Australia; however, another 27.8 percent said business was comparatively good (22.2 percent) or very good (5.6 percent) percent of West Australian businesses answered good (25.0 percent) or very good (6.7 percent), while 18.3 percent felt business in Western Australia was bad (13.3 percent) or very bad (5.0 percent) compared to other states. How do you rate the business conditions in the state/territory that you operate in, compared to the rest of Australia? 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% ACT NSW NT SA Qld Tas Vic WA Very Good Good Bad Very Bad Average At the other end of the spectrum, more than two-thirds of companies based in the ACT believe business conditions in their region are superior to the rest of Australia, while just 7.7 percent feel they are worse off. Economic conditions and the outlook in South Australia remain soft. South Australia has not benefitted from the population surge evident in the eastern states and as a result, the boost to household wealth from a strong housing market has been absent, Mr Koukoulas said. Contact: Bryony Duncan-Smith === DuncanSmithB@dnb.com.au

5 The latest D&B Australian Business Expectations Survey shows: Expectations index for the December quarter 2017: The Employment Expectations Index is up, climbing to 15.3 points compared to 14.2 points in the September quarter and 13.0 points a year ago. The Sales Expectations Index rose to 30.8 points, up from 28.7 points in the September quarter and up slightly from 30.1 points at the same time last year. The Profit Expectations Index climbed to 19.3 points, up from 16.3 points in the previous quarter and 17.1 points in the final quarter of The Capital Investment Expectations Index jumped to 12.3 points from 7.8 points in the September quarter and 7.9 points a year ago. The Selling Prices Expectations Index was up at 21.0 points compared to 17.6 points in the previous quarter and 9.3 points in the previous corresponding quarter. Issues expected to influence operations in the December quarter 2017: 59.0 percent of businesses are more optimistic about growth in 2017 compared to 2016, while 28.5 percent are less optimistic and 12.5 percent are undecided. Consumer confidence (32.7 percent) is identified as the issue most likely to influence business operations in the December quarter, followed by cash flow (14.5 percent) and level of Australian dollar (7.3 percent). Utilities and operating costs was identified as the biggest barrier to growth in the year ahead at 17.4 percent, followed by online selling by competitors (16.0 percent) and access/shortage of skilled labour (12.6 percent) percent of businesses reported having a customer or supplier that became insolvent, or was otherwise unable to pay them in the past year percent of businesses would choose to miss payments to suppliers if unable to pay all their bills on time, followed by payments on a business credit card (28.1 percent) percent of businesses would prefer a higher Australian dollar and 9.7 percent a lower dollar, while 64.4 percent think that it doesn t matter. 6.8 percent are unsure percent of businesses intend to seek finance or credit in the quarter ahead to help their business grow, while 74.3 percent will not, and 8.7 percent are undecided. Actual results reported for the June quarter 2017: The Actual Employment Index for the June quarter fell to 5.2 points, down from 8.2 points in the March quarter but up from 4.6 points at the same time last year. The Actual Sales Index rose to 14.4 points, up from 12.6 points in the previous quarter but down from 15.5 points a year earlier. Actual Profits were up, with the index jumping to 7.1 points in the June quarter from 4.3 points in the March quarter, but the current figure is down from 7.9 points in the previous corresponding quarter. The Actual Capital Investment Index rose to 9.4 points in the June quarter, up from 5.1 points in the March quarter and 7.7 points a year earlier. The Actual Selling Prices Index was up, climbing to 11.7 points in the June quarter compared to 10.1 points in the previous quarter and 6.6 points in the prior corresponding quarter. About Dun & Bradstreet Established in 1887, Dun & Bradstreet is Australia and New Zealand's longest established credit information bureau. Backed by its extensive financial database, D&B helps businesses to make informed credit decisions, and consumers to access personal credit information. D&B works across the entire credit lifecycle to deliver data-driven solutions in sales and marketing, credit reporting and debt management. Through analysis of financial and behavioural information, D&B also provides current and predictive assessments of the economy, business conditions and credit activity. 1

6 Methodology Each month D&B asks a sample of executives if they expect an increase, decrease or no change in their quarterahead sales, profits, employees, capital investment and selling prices compared with the same quarter a year ago. The executives are also asked for actual changes over the twelve months to the latest completed quarter. In this issue, the preliminary indexes for the latest quarters are based on approximately 400 responses obtained during July Charts and tables It is common practice to present the results of business expectations surveys as indexes showing the net balance of the positive and negative responses. However, this method of aggregating responses loses relevant information about the relative proportions and rates of change of the two (positive and negative) groups. Accordingly, the detailed charts at the top of pages six to 10 in the D&B Australian Business Expectations Survey show separately the positive and negative components of each of the various indexes. These charts help provide a better insight into the expectations and performance of Australian business than that shown by movements in the simple aggregation of the positive and negative responses. The aggregate net balance indexes are shown in the charts at the bottom of pages six to 10. About Dun & Bradstreet Established in 1887, Dun & Bradstreet is Australia and New Zealand's oldest credit information bureau. Backed by its extensive financial database, D&B helps businesses to make informed credit decisions, and consumers to access personal credit information. D&B works across the entire credit lifecycle to deliver data-driven solutions in sales and marketing, credit reporting and debt management. Through analysis of financial and behavioural information, D&B also provides current and predictive assessments of the economy, business conditions and credit activity.

7 Sales outlook (Quarterly Net Index) (30.8 points, up from 28.7 points) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The December quarter 2017 Sales Expectations Index is 30.8 points, up from 28.7 points in the previous quarter and 30.1 points a year ago. The index is now 13.0 points above its 10-year average of 17.8 points percent of businesses expect an increase in their sales for the December quarter of 2017, while 11.0 percent forecast a decrease, compared to the same time in Actual performance The Actual Sales Index for the second quarter of 2017 is 14.4 points, up from 12.6 points in the first quarter 2017 but down from 15.5 points a year earlier percent of firms reported increased sales in the June quarter and 18.3 percent had decreased sales compared to the previous corresponding quarter.

8 Profits outlook (Quarterly Net Index) (19.3 points, up from 16.3 points) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The outlook for profits in the December quarter 2017 is an index of 19.3 points, up from 16.3 points in the previous quarter and 17.1 points last year. The outlook for profits is 10.6 points above the 10-year average index of 8.7 points percent of businesses expect an increase in their profits during the fourth quarter, while 15.1 percent forecast a decrease, compared to the same period last year. Actual performance The Actual Profits Index for the June 2017 quarter is 7.1 points, up from 4.3 points in the previous quarter but down from 7.9 points in the year-earlier period. During the June quarter of 2017, 27.2 percent of businesses increased their profits, while 20.1 percent experienced a decrease compared to the June quarter of 2016.

9 Employment outlook (Quarterly Net Index) (15.3 points, up from 14.2 points) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The employment outlook for the December quarter 2017 is 15.3 points, up from 14.2 points in the previous quarter and 13.0 points a year earlier. The outlook for employment is 11.0 points above the 10- year average index of 4.3 points. Some 23.9 percent of executives expect to employ more staff in the fourth quarter 2017 compared to the fourth quarter 2016, while 8.6 percent expect to decrease their staff numbers. Actual performance The Actual Employment Index for the June 2017 quarter is 5.2 points, down from 8.2 points in the previous quarter but up from 4.6 points a year earlier. In the June quarter, 20.3 percent of businesses employed more staff than a year earlier, compared to the 15.0 percent that reduced their employment levels.

10 Capital Investment outlook (Quarterly Net Index) (12.3 points, up from 7.8 points) The positive and negative components of the D&B indexes are shown in the adjacent chart. Expectations The capital investment outlook for the fourth quarter 2017 is 12.3 points, up from 7.8 in the third quarter and 7.9 points a year earlier. The Capital Investment Expectations Index is 5.0 points above the 10-year average index of 7.3 points percent of businesses expect an increase in their investment level in the December quarter of 2017, while 7.9 percent plan to decrease investment levels compared with a year earlier. Actual performance For the second quarter 2017, the actual index for investment is 9.4 points, up from 5.1 points in the previous quarter and 7.7 points a year ago. Some 18.0 percent of firms increased their capital investment in Q compared to Q2 2016, while 8.6 percent decreased capital spending.

11 Selling Prices outlook (Quarterly Net Index) (21.0 points, up from 17.6 points) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The Selling Prices Expectations Index for Q is 21.0 points, up from 17.6 points in the previous quarter and up from 9.3 points a year earlier. The outlook for selling prices is 2.0 points lower than the 10-year average of 23.0 points. Some 27.5 percent of firms expect to have higher selling prices in the December quarter 2017 compared to a year earlier, while 6.6 percent expect to lower prices. Actual performance The Actual Selling Prices Index for the June 2017 quarter is 11.7 points, up from 10.1 points in the previous quarter but up from 6.6 points a year ago. While 21.0 percent of businesses increased their selling prices compared to the same time a year earlier, 9.3 percent had decreased selling prices.

12 D&B Survey Quarterly Indexes Expected Quarter Ahead: Net per cent of businesses expecting increases minus decreases QUARTER Mar 2016 Jun 2016 Sep 2016 Dec 2016 Mar 2017 June 2017 Sep 2017 Dec 2017 Sales Profits Employees Capital Investment Selling Prices Actual Quarter Behind: Net per cent of businesses reporting increases minus decreases QUARTER Sep 2015 Dec 2015 Mar 2016 June 2016 Sep 2016 Dec 2017 Mar 2017 Jun 2017 Sales Profits Employees Capital Investment Selling Prices Survey Months Jan Mar 2016 Apr Jun 2016 Jul Sep 2016 Oct - Dec 2016 Jan - Mar 2017 April- June 2017 July 2017 Number of Responses Quarterly Indexes: Each batch of monthly responses is given an equal weight in the calculation of the new quarterly indexes. Preliminary indexes: Q (Expected) and Q (Actual) findings are based on the 413 responses obtained during July 2017.

13 Expected Quarter Ahead: Net per cent of businesses expecting increases minus decreases QUARTER Mar Jun Sep Dec Mar Jun Sep Dec Sales Expectations Manufacturers: Wholesalers: Retailers: Construction: Transport, Communication,Utilities: Finance, Insurance, Real Estate: Services: All Industries Profits Expectations Manufacturers: Wholesalers: Retailers: Construction: Transport, Communication,Utilities: Finance, Insurance, Real Estate: Services: All Industries Employees Expectations Manufacturers: Wholesalers: Retailers: Construction: Transport, Communication, Utilities: Finance, Insurance, Real Estate: Services: All Industries

14 Expected Quarter Ahead: Net per cent of businesses expecting increases minus decreases QUARTER Mar Jun Sep Dec Mar Jun Sep Dec Capital Investment Expectations Manufacturers Wholesalers Retailers Construction Transport, Communication, Utilities Finance, Insurance, Real Estate Services All Industries Selling Prices Expectations Manufacturers Wholesalers Retailers Construction Transport, Communication, Utilities Finance, Insurance, Real Estate Services All Industries

15 Actual Quarter Behind: Net per cent of businesses reporting increases minus decreases QUARTER Sep Dec Mar June Sep Dec Mar Jun Sales Actual Manufacturers Wholesalers Retailers Construction Transport, Communication, Utilities Finance, Insurance, Real Estate Services All Industries Profits Actual Manufacturers Wholesalers Retailers Construction Transport, Communication, Utilities Finance, Insurance, Real Estate Services All Industries Employees Actual Manufacturers Wholesalers Retailers Construction Transport, Communication, Utilities Finance, Insurance, Real Estate Services All Industries

16 Actual Quarter Behind: Net per cent of businesses reporting increases minus decreases QUARTER Sep Dec Mar June Sep Dec Mar June Capital Investment Actual Manufacturers Wholesalers Retailers Construction Transport, Communication, Utilities Finance, Insurance, Real Estate Services All Industries Selling Prices Actual Manufacturers Wholesalers Retailers Construction Transport, Communication, Utilities Finance, Insurance, Real Estate Services All Industries

17 D&B Supplementary Questions Thinking about the quarter ahead, which issue do you think will influence the operations of your business the most? (July 2017) Wages & Level of Access Don t Interest Fuel Cash Consumer salary Australian to credit rates prices flow confidence growth dollar All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (June 2017) Wages & salary growth Level of Australian dollar Access to credit Interest Fuel Cash Consumer rates prices flow confidence All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % Don t (May 2017) Wages & Level of Access Don t Interest Fuel Cash Consumer salary Australian to credit rates prices flow confidence growth dollar All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services %

18 Thinking about your business for the quarter ahead, are you likely to seek finance or credit to help your business grow? (July 2017) Not Yes No sure/don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (June 2017) Not Yes No sure/don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (May 2017) Not Yes No sure/don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services %

19 What do you see as the biggest barrier to growing your business in the year ahead? (July 2017) Access/ shortage of skilled labour Access/ shortage of funding Weak demand for products Cash flow Online selling by competi tors Utilities and operating costs Not sure/ don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (June 2017) Access/ shortage of skilled labour Access/ shortage of funding Weak demand for products Cash flow Online selling by competi tors Utilities and operating costs Not sure/ don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (May 2017) Access/ shortage of skilled labour Access/ shortage of funding Weak demand for products Cash flow Online selling by competi tors Utilities and operating costs Not sure/ don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services %

20 Would your business benefit if the Australian dollar was higher or lower than its current level? (July 2017) Higher Lower Doesn t matter Not sure/ don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (June 2017) Higher Lower Doesn t matter Not sure/ don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (May 2017) Higher Lower Doesn t matter Not sure/ don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services %

21 In the past 12 months, have any of your customers or suppliers become insolvent or otherwise unable to pay you? (July 2017) I don t Yes No /I d rather not say All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (June 2017) I don t Yes No /I d rather not say All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (May 2017) I don t Yes No /I d rather not say All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services %

22 Are you generally more optimistic, or less optimistic, about growing your business in 2017 compared to last year? (July 2017) More optimistic Less optimistic Not sure/don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (June 2017) More optimistic Less optimistic Not sure/don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (May 2017) More optimistic Less optimistic Not sure/don t All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services %

23 If you find yourself unable to pay all of your bills, which of the following would you choose to pay late/miss? (July 2017) Phone Internet Utilities Suppliers Rent/m ortgage Business loan/ overdraft Business credit card All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (June 2017) Phone Internet Utilities Suppliers Rent/m ortgage Business loan/ overdraft Business credit card All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services % (May 2017) Phone Internet Utilities Suppliers Rent/m ortgage Business loan/ overdraft Business credit card All Firms % Manufacturers % Wholesale % Retail % Construction % Transport etc % Finance etc % Services %