BUSINESS FRIENDLY BUDGET DOESN'T BOOST CONFIDENCE

Written on the 4 June 2015

BUSINESS FRIENDLY BUDGET DOESN'T BOOST CONFIDENCE

BUSINESS confidence ahead of the next financial year has taken a dip despite incentives announced in the Federal Budget, according to Dun & Bradstreet.

The management consultancy's Business Expectations Survey shows business executives anticipate a weak third quarter on expected sales, profits, investment and employment levels.

The Business Expectations Index dropped from 20.7 points last quarter down to 13.4 points. Comparatively the index was 19.5 points this time last year.

The Business Actuals Index took a hit, falling from 15.5 points to 8.1 points during the same period.

Economic uncertainty also fuelled a 4.4 per cent decline in capital expenditure in the first quarter of 2015, according to figures by the ABS.

D&B Australia and New Zealand CEO Gareth Jones (pictured) says although the decline is from a period of optimism, the survey results are supported by other economic indicators.

"While this recent correction in the business outlook is from a relatively high point, its trajectory is worrying as is the drop away in the actual performance reported by businesses for the past quarter," Jones says.

"It appears that businesses, despite stimulatory news in the budget, have shelved expansion plans until the end of this year at the earliest.

"Demand remains the key missing ingredient, as demonstrated by the latest capex figures and by what businesses are reporting through our monthly survey."

Weak demand for products and services was considered to be the biggest barrier to growth at 24 per cent, ahead of online competition at 15 per cent, cash flow at 14 per cent and operating costs at 13 per cent.

Sales expectations have impacted the manufacturing sector, with 39 per cent of businesses forecasting an increase in sales compared to 52 per cent last year. The sentiment was similar among wholesalers and the construction industry.

Whereas retailers have bucked the trend with 48 per cent expecting renewed sales, up from 45 per cent last quarter.

The Employment Expectations Index for the third quarter is 8.9 points, down from 16.8 points in the previous quarter with 12 per cent of respondents planning to cut staff.

D&B economic advisor Stephen Koukoulas says the economy has hit a "brick wall" based on employment expectations.

"The severe slumps in expected sales and employment are particularly worrying for the business outlook, while the actual performance of the economy has also undershot prior expectations," Koukoulas says.

"Businesses that reported relatively optimistic conditions early in 2015 are now facing the reality of an underperforming economy and their responses to this survey suggest there is some risk that the unemployment rate will rise further during the second half of 2015."


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