Gloomier View From The Top
The Age
Tuesday March 9, 2004
After their high hopes in December, business executives seem to have adopted a more subdued outlook with their expectations for sales, profits and employment growth at the lowest in 12 months, a new business survey has found.
The survey's findings suggest the slippage coincides with a slowdown in consumer spending and the prospect of further interest rate rises.
According to the latest D&B national business expectations survey, 36 per cent of retailers, 18 per cent of manufacturers and 15 per cent of wholesale executives were now reporting a consumer spending slowdown.
The survey is a departure from the upbeat outlook executives expressed in recent D&B studies.
The restraint, however, is in contrast to the quality of the results. Actual company results for the fourth quarter of 2003 were among the best in four years.
These were not only in line with expectations but had been achieved with very low increases in selling prices.
While only 10 per cent of executives have reported signs of a slowdown in the construction sector, there are worrying signals from durables manufacturers. Producing goods such as furniture, metal products, machinery and plastic products, this sector is closely tied to the construction industry.
Durables manufacturers recorded the greatest fall in sales and profit expectations for the second quarter.
On the plus side, however, the dollar continued to cause more gain than pain. The study showed that 26 per cent reported positive effects and only 14 per cent reported a negative impact.
D&B Australia & New Zealand chief executive Christine Christian said consumer spending growth appeared to have reached its peak although housing construction activity showed no signs of abating just yet.
``The slowdown was perhaps to be expected, given that the very robust annual growth rate of 5.5 per cent in the volume of household spending in 2003 was unlikely to be sustainable in the near term," Ms Christian said.
Profit expectations for the June quarter fell sharply. The net proportion of executives expecting an increase in earnings in the quarter was 21 per cent, the lowest level in 11 months.
The outlook for employment was also the worst in 11 months.
Similarly, the outlook of executives expecting an increase in sales took a dive, falling to a net 23 per cent.
Nor were there many signs that businesses were preparing for growth, with the investment outlook continuing to slide, falling to its lowest level in two years.
The net proportion of executives expecting to increase capital investment in the June quarter was just 2 per cent.
The survey found that 54 per cent of executives said a jump in bank lending rates as a result of higher interest rates would have a negative impact.
The cost of bank borrowings was ranked by 16 per cent of executives as the second-greatest economic pressure on their business in 2004. This was the same figure for salary increases and was second only to insurance costs, at 19 per cent.
© 2004 The Age
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