Australia's job market has continued to strengthen despite talk of an interest rate rise, with 14 per cent of companies expecting to increase employee numbers in the December quarter, according to the latest Dun & Bradstreet's Business Expectations survey
Australia's job market has continued to strengthen despite talk of an interest rate rise, with 14 per cent of companies expecting to increase employee numbers in the December quarter, according to the latest Dun & Bradstreet's Business Expectations survey.
The full statement is below:
The likelihood of Australia's unemployment levels continuing to rise appears to be diminishing with fourteen percent of Australian firms planning to take on staff in the lead up to Christmas.
Firms are also positive about the sales and profits outlook and have the confidence to increase inventory levels and capital investment in the quarter ahead.
These findings are from the latest D&B Business Expectations Survey, which shows that all indexes have continued to improve. Signs of improvement are particularly noticeable in the employment index which has risen by twenty six percentage points since last quarter.
Fourteen percent of firms expect to increase staff in the December quarter, while ten percent intend to reduce employee numbers. This improvement in expectations comes on the back of improvements in the employment market in the June quarter when 11 percent of firms took on new staff.
A recent OECD study demonstrates the significance of the improvement in employment expectations. The report stated that companies' hiring intentions play a central role in driving unemployment levels, consequently substantial increases in firms expecting to take on new staff will assist in reducing long term unemployment in Australia.
Capital investment expectations have improved strongly to reach their highest level in nine quarters. Sixteen percent of firms expect to increase investment, while just eight percent are planning to decrease spending in this area. Non-durable manufacturers have experienced the most significant increase in expectations (up 22 percentage points since the September quarter) as the capital investment index returned to positive territory.
Capital investment reached its highest point in more than two years with fifteen percent of firms increasing their capital investment in the June 2009 quarter. If this trend continues this bodes well for future GDP growth in Australia.
Inventory expectations are at their highest level more than four years. Eighteen percent of executives expect to increase inventories in the December 2009 quarter, while 14 percent plan to reduce stock levels.
The expectations of retail executives have reached the highest level in more than five years, with 22 percent of firms expecting to increase stock levels over the Christmas period.
This significant increase in expectations indicates that retail executives are confident about their ability to sell their stock over the Christmas trading period. The outlook for sales and profits have also continued to improve.
The sales index has risen 50 percentage points since the previous quarter, the largest one-quarter rise in the history of the survey.
Forty six percent of firms expect an increase in sales and twenty percent a decrease in sales in the December 2009 quarter. Further highlighting the significance of the turn-around, the positive sales outlook follows the June quarter actual results when 40 percent of firms experienced lower sales.
The profits index has made a strong advance, with thirty percent of executives now anticipating profits will increase in the December quarter. Executives in the wholesale sector have the highest expectations, with 32 percent expecting profits to increase.
Expectations in the retail sector have also improved, rising by 33 percentage points since the September quarter. Twenty seven percent expect an increase in profit and twenty four percent a decrease within the retail sector.
Expectations for selling prices have fallen by 56 percentage points since the March quarter 2009. Three in ten (29 percent) firms expect to raise prices in the December quarter, while 10 percent expect to lower prices.
Retail executives have experienced the most significant drop in expectations for increased prices, falling 57 percentage points since the March 2009 quarter to nineteen percentage points.
Twenty nine percent of firms expect to increase prices and ten reduce prices within the retail sector in the December 2009 quarter. Inventories and sales expectations indicate that retail executives are expecting a solid Christmas trading period however moves to increase prices could impact their ability to move their stock in the months ahead.
According to Dun & Bradstreet's CEO Christine Christian, the expectations of Australia's executives have improved significantly over the past six months, with confidence levels now relatively strong as we head into the Christmas trading period.
"Signs of trouble began to appear in the June quarter of 2008, with expectations falling to their lowest point 12 months later. Since then expectations have improved relatively sharply, with all indices now back in positive territory for the first time since June 2008," said Ms Christian.
"The drastic rise in employment expectations is particularly important. Employment intentions often have a significant impact on the long-term unemployment rate; therefore the drastic improvement in this index should play a critical role in helping to reduce unemployment.
After the 1991 recession it took eleven years for unemployment to return to pre-recession levels however, the current expectations suggest the return to lower unemployment figures should occur more quickly this time around."
Forty percent of executives believe a slow growth in demand will be their biggest barrier to success in the year ahead. Funding shortages and access to skilled staff are also seen as barriers, with 20 percent and 10 percent of firms respectively reporting these issues as those most likely to impede growth.
The impact of credit market conditions on Australian businesses are beginning to decline. Thirty nine percent of firms indicated that credit market conditions are detrimentally impacting operations (a decrease of six percent in one month), while 18 percent report a positive impact (up 11 percent since last month).
Rising business-to-business payment days have had a negative impact on four in ten (43 percent) firms. This is a three percent improvement since last month, but with business to business payment days still at 54.8 days (well above the standard 30 day terms), improvement is needed to ensure cash-flow and growth are not inhibited.
The number of executives expecting interest rates to be the most significant influence on their business in the quarter ahead has risen by six percent since July.
Thirty six percent of executives believe interest rates will be the primary influence on operations in the quarter ahead - a figure that is likely to continue rising if interest rates increase in the final quarter of 2009.
Meanwhile, 30 percent of firms rank wages growth as a major influence on their business and 15 percent consider fuel prices to be their primary concern (a 15 percent fall since June 2009).
At the same time, the negative impact of movements in petrol prices on firms has remained steady, rising by just one percent since July (to twenty eight percent). Meanwhile, 59 percent of respondents believe that movements in petrol prices are currently having no impact on their business an increase of 10 percent in one month.
According to Dr Duncan Ironmonger, Dun & Bradstreet's economic consultant, the September D&B survey responses broadly confirm the outlook for the December quarter obtained from the July and August surveys, with executives slightly more concerned about the impact of interest rates on their business.
"This reflects the well-publicised fact that the Reserve Bank would like to move the cash rate up from the historically low rate of three percent as soon as it is clear that the recovery in economic activity will be sustained. The RBA meeting this week is unlikely to initiate a rise in rates, particularly as indications are that the annual inflation rate continues to be below the target band of two to three percent," said Dr Ironmonger.
"The D&B survey indicates that executives are expecting large rises in sales, profits, employment, inventories and capital expenditure in the December quarter 2009. These expectations combine with the lowest anticipation for selling price rises in more than four years.
If these expectations are realised interest rate rises could well be deferred until December." The D&B index for expected sales is up 50 points to 26, with 46 percent of executives expecting an increase in sales and 20 percent expecting a decrease. The profits index is up 40 points to 7, with 30 percent of executives expecting profits to rise and 23 percent expecting a fall.
Employment expectations are up 26 points an index of 4, with 14 percent of executives expecting an increase in staff and 10 percent expecting a reduction. Capital investment expectations are up 16 points to an index of 8, with 16 percent of executives expecting an increase and 8 percent expecting to cut spending. Inventories expectations are up 22 points to an index of 4.
The selling prices index is down 33 points to an index of 19, with 29 percent of firms expecting to raise prices and 10 percent expecting to decrease them.
