JUNE QUARTER OUTLOOK REVEALS DECLINE IN EXPECTATIONS

Written on the 11 April 2011

JUNE QUARTER OUTLOOK REVEALS DECLINE IN EXPECTATIONS

BUSINESS expectations have declined as consumer deleveraging weighs down retailers, wholesalers and manufacturers, according to the latest Dun & Bradstreet Business Expectations Survey. Dun & Bradstreet CEO Christine Christian believes the latest results show that consumer deleveraging is becoming an entrenched trend that is primarily impacting retailers but also flowing through to their suppliers in the wholesale and manufacturing industries.

The impact of consumer deleveraging is most evident in sales and profit expectations but is also flowing through to other key indices.

Sales expectations are now at their lowest level in almost two years, dropping 14 points to a net index of 17. Expectations are particularly weak for the retail sector, which has struggled to stimulate consumer interest even with heavy discounting. Sales expectations for retailers sit at a net index of eight, which is nine points below the overall index of 17. Only non-durable manufacturers have higher sales expectations for the June quarter.

The decline in sales expectations is flowing through to the outlook for profits with the overall profits index dropping 17 points to a net index of 13. However, while the drop is significant profit expectations still remain well above the 10 year average.

This relatively strong performance compared with the long run average may explain why expectations for declining margins are not resulting in attempts to fill the gap through increased prices. The absence of a fundamental change in pricing in response to the sales and profits outlook is evident in the selling price expectations of executives, which has dropped only one point. Retailers have lowered their expectations for price increases signalling that they will continue to keep discounting in an attempt to stimulate sales.

Capital investment and inventories expectations are also experiencing declines as a result of the more subdued sales and profits outlook. The capital expectations index has declined six points to a net index of seven, which is well down on the previous year and just above the 10-year average. This fall in investment expectations follows a lower net index (six) for actual capital expenditure during the December quarter of 2010.

Inventory expectations are down five points as more executives plan to destock in response to the sales outlook. The process of de-stocking has a flow-on effect throughout the supply chain for most firms. The reduction in the inventories expectations index comes on the back of the first quarter of negative actual inventories growth in more than a year.

Employment expectations have also declined and are now at their lowest level in five quarters. At the same time rising wages have been replaced by uncertainty about interest rates as the No.1 concern for executives.

Heavy discounting by retailers does not appear to be dissuading consumers from paying down their debt and increasing their savings.

Retailers now appear to be accepting the permanency of this trend and have adjusted their expectations for the June quarter accordingly. As a result manufacturers and wholesalers have also lowered their expectations and the consumer effect washes through the supply chain.

The latest Business Expectations Survey also reveals that 48 per cent of executives see that a continuing strong Australian dollar will have a positive impact on their business in the quarter ahead – for 21 per cent a significant impact.

Only 16 per cent expect a high dollar to have a negative impact; for 37 per cent it will have no impact.


Latest News

2017 BRISBANE TOP COMPANIES REVEALED

WHILE Queensland is regarded as an economy in transition with the winding down of the mining boom, the 2017 top 50...

2017 BRISBANE TOP COMPANIES 1-10

FROM insurance and banking to travel, gambling, retail, property and pizza, these "heavyweights" have ha...

2017 BRISBANE TOP COMPANIES 11-20

RETAIL, property, an airline, cars, real estate, software services, energy, agriculture, veterinary services bathr...

2017 BRISBANE TOP COMPANIES 21-30

JEWELLERS Michael Hill International listed in 2016 with a half-billion dollar market capitalisation and a new CEO...

Related News

FURNITURE DISRUPTOR SET TO SHARE HIS ONE OF A KIND BUSINESS MODEL

IT'S no secret that Australians love homemaking. Their ceaseless quest to create the perfect place to call hom...

WEEDING OUT THE ASX'S BURGEONING CANNABIS TREND: 8 COMPANIES TO WATCH

A NICHE is budding on the ASX in the form of medical cannabis, an industry which has been on the country's rad...

FRESH CLASS ACTION TO REVEAL ANOTHER SIDE OF SLATER AND GORDON DOWNFALL

ACA LAWYERS has issued a formal letter of demand to Andrew Grech (pictured), managing director of Slater and Gordo...

STARSHIPS WERE MEANT TO DELIVER DOMINO'S PIZZA

NICKI Minaj may have been off the mark when she declared 'starships were meant to fly'. However, she m...

BOOK YOUR FUNCTION SPACE HERE

 

 

 

Contact us

Email News Update Sign Up Contact Details
Subscriptions

PO Box 2087
Brisbane QLD 4001

LoginTell a FriendSign Up to Newsletter