Business confidence low

BUSINESS expectations are at their lowest ebb in a decade, according to the latest Dun & Bradstreet National Business Expectations Survey.

Sales expectations fell 10 points to a net minus 5 per cent and employment expectations fell to a net minus 1 per cent – the first time either index has been negative since the 1991 recession.

The survey also revealed business owners were divided over the GST’s potential impact on retail sales over the Christmas period.

Of those executives surveyed, 51 per cent said the increase in some prices because of the GST would not hurt Christmas sales.

D&B managing director Australia & New Zealand Christine Christian said this survey showed business pessimism appeared to be growing.

“Despite the good news about budget surplus, a stronger Australian dollar and the booming export market, businesses at the front line seem to be losing confidence,” Ms Christian said.

“The cash-flow squeeze, higher fuel prices, lower than expected retail spending and interest rate uncertainty all play a role in sapping confidence.”

The D&B sales trend index is now 68 points lower than in December 1999, with 32 per cent of executives expecting an increase in sales and 37 per cent a decrease. The employment index is 28 points down on January’s peak, with 15 per cent of employers expecting to increase staff numbers and 16 per cent expecting to shed staff. Profit expectations have fallen 52 points since January and capital investment expectations are at their lowest ebb since they were first measured in 1994.

The negative business confidence sentiment was echoed in the Australian Chamber of Commerce and Industry and Westpac Bank December Quarter Survey results released last week.

Only 11 per cent of the ACCI/Westpac survey predicted an improvement in the business situation in the next six months.

Westpac general manager economics Bill Evans said the survey supported Westpac’s view that the Reserve Bank was unlikely to increase interest rates.

Inflationary pressures look like diminishing as employment growth slows, taking pressure off wages and moderating any RBA concerns about a break out in wage growth.

Weak profit expectations and a selling price downturn, indicating manufactures are facing margin pressures, are also taking the pressure off inflation despite a weak Australian dollar and higher petrol prices.

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