CAUTIOUS CONSUMERS PUT PRESSURE ON PRICES

Written on the 5 February 2013

CAUTIOUS CONSUMERS PUT PRESSURE ON PRICES

DISCOUNTING has become the “new normal” as business owners work to entice cautious consumers, says Dun & Bradstreet CEO Gareth Jones in reaction to the latest Nation Business Expectations Survey.

The selling price expectation index in today’s D&B report dropped nine points to three, 26 points below the 10-year average and its lowest level since the company started the quarterly survey in 1988.

Meanwhile, actual selling prices have been below the expectations of business executives for 10 consecutive quarters.

Businesses are also anticipating reduced activity; with expectations for sales and inventory levels pulling back from the previous quarter's expectations.

The D&B sales expectations index has dropped to nine points from a relative high in the previous quarter of 33, as 57 per cent of businesses identified 'demand for their products' as the most serious barrier to growth this year.

Business is also looking to reduce inventories, with the index falling from 24 to 16.

Jones is expecting businesses to focus on discounting to encourage spending.

“We know there is traditionally a drop off in spending following the Christmas period as consumers play catch-up with their household budgets and debts following an often expensive holiday period,” says Jones.

“Although the most recent data has taken selling price expectations to a new low, it is part of a long downward trend that suggests ongoing discounting has become the new normal.

Profit expectation is the only D&B indicator to increase, moving upwards for the second consecutive quarter to an index of 23, while the employment indicator is steady and capital investment indicator down one point.

Each quarter D&B surveys 1,200 business owners and executives from major industry sectors across Australia for the National Business Expectations Survey.


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