BUSINESSES TO GROW ON CREDIT
Written on the 1 July 2014 by Laura Daquino
MORE businesses intend to borrow credit over the next quarter, a sign of business confidence according to the Dun & Bradstreet National Business Expectations Survey released today.
As the sun rises for the new financial year, businesses are looking toward the future and more are setting sights on securing credit to grow during the third quarter of the year.
In light of low interest rates, 21 per cent of Australian businesses have reported this intention, the highest response since the beginning of 2011.
Borrowing plans have followed a jagged trend line over the past two years, with a sharp fall in mid-2012 based on uncertainty surrounding economic recovery, and a pick up following the Federal Election in the final quarter of 2013.
The warm response to credit in this quarter’s survey coincides with an improving appetite for finance, capital investment and hiring expectations – indications that businesses are open for business.
21 per cent of businesses expect to hire, contrasted with only 8 per cent planning to reduce their headcount.
“Significant to the broader economic picture is the continued lift in business investment and employment plans which are being bolstered by a more positive attitude towards accessing new finance,” says Adam Siddique, head of Dun & Bradstreet group development.
“Credit is a driving force in the economy and a critical tool for business investment and expansion, making this recent upward trend in borrowing plans particularly encouraging.”
While businesses are confident they can bank on credit, the report showed that expectations for sales, profits and selling prices have all declined from the previous quarter.
The sales index has eased from 33.6 points to 32.5 points, profit expectations from 20.7 points to 19.9 points, and selling prices from 24.2 points to 20.3 points.
“Activity in the business sector remains mixed, however, the positive news on borrowing and capital investment intentions points to a degree of optimism,” says Stephen Koukoulas, economic advisor to Dun & Bradstreet.
“After a strong upswing in late 2013 and early 2014, expectations for sales, profits and selling prices have all edged lower, although they remain well above the levels of a year ago.”
The most recent Dun & Bradstreet National Business Expectations Survey was based on the expectations of 1200 executives surveyed in April to June this year.