Employment outlook brightens for second quarter    

 

The results from Dun & Bradstreet’s January Business Expectations Survey have highlighted a third consecutive period of subdued expectations, with businesses reporting a pessimistic outlook for the second quarter of 2016.

However, the Employment outlook has improved, with the index up to 13.7 points, compared to 12.0 points in the March quarter of 2016. Although the percentage of businesses intending to employ more staff fell from 24.1 per cent in the first quarter of 2016 to 22.0 per cent in the second quarter, the percentage of businesses expecting a decrease in employee numbers dropped from 12.1 per cent to 8.4 per cent over the same period.

The Selling Prices Index also improved steadily over the period, from 15.1 points to 19 points. Of the businesses surveyed, 27.5 per cent expect to increase prices over the June 2015 quarter, while 9.2 per cent are likely to reduce prices. The remaining 63.3 per cent of businesses are unlikely to change pricing levels.

Dun & Bradstreet’s Business Expectations Index, the average of the survey’s measures of Sales, Profits, Employment and Capital Investment, has fallen to 16.5 points for the second quarter of 2016, down 2.4 points from 18.9 points for Q1 2016, and a fall of 3.6 points from 20.1 points for Q2 2015. Nonetheless, it is significantly higher than the 10-year average of 7.0 points, and, despite some fluctuations, expectations have generally risen over the past three years.

The Business Expectations Index is an aggregate of the survey’s
measures of sales, profits employment and investment expectations.

Overall, businesses reported lower expectations for Sales, Profits and Capital Investment for the second quarter of 2016 compared to the first quarter, with the figures dipping by 5.7 points, 3.1 points and 2.6 points respectively.

 

According to Adam Siddique, Head of Group Development at Dun & Bradstreet, the results highlight the entrenched caution that pervades business sentiment in most sectors of the economy, despite the fundamentals that suggest such pessimism may not be warranted.

“We are observing a persistent lack of conviction with business expectations in almost all categories we survey, which reinforces the wait-and-see approach that we’ve reported over recent months. Not surprisingly, key movements in expectations indices have tended to follow official economic announcements in recent times, such as the employment outlook edging higher in this survey following recent strong labour market data,” Mr Siddique said.

“Of particular concern is the collapse in business expectations in the retail industry, which was widely acknowledged to have experienced a very strong Christmas trading season. With a favourable labour market and consumer sentiment being generally positive, we wouldn’t have expected the outlook for retailers to decline so sharply, so we’ll be keenly monitoring this space in the months ahead given the importance of the retail sector to the broader economy,” he added.

On an industry level, the Business Expectations Index saw declines across five of the seven industries surveyed. The two exceptions were the Construction industry, where the index jumped from 11.3 points to 22.8 points, and the Finance, Insurance & Real Estate industry, with expectations increasing from 19.6 points to 28.1 points.

In contrast, expectations within the Retail industry have fallen dramatically since the Christmas period, with the figure dropping from 29.9 points for the December quarter of 2015 to 20.6 points for the March quarter of 2016, then plunging to 6.7 points for the June 2016 quarter.

According to Stephen Koukoulas, Economic Advisor to Dun & Bradstreet, "the general pull-back in overall business expectations has continued despite the bulk of the news on the economy remaining solid. The only element where business expectations lifted was Employment, which fits with the recent run of official labour market data showing solid jobs growth. All components other than Expected Selling Prices have edged lower".

In contrast to the more pessimistic Business Expectations Index, the Business Actuals Index saw its third consecutive increase over the December quarter of 2015, up 1.9 points from 11.0 points to 12.9 points, an increase of 10.8 points from its 10-year average of 2.1 points. The index saw improvements across all components except Profits. In particular, the Actual Employment index performed strongly, with the figure jumping from 5.5 points to 9.7 points, while the Actual Sales index lifted from 19.1 points to 22.6 points.

Although the Actual Profits Index fell over the fourth quarter of 2015, dropping from 8.5 points to 7.4 points, the latest figure is still higher than the first and second quarter numbers (4.8 points and 7.3 points respectively), and significantly higher than the ten-year average of -3.8 points.

"In terms of the actual performance of the economy, businesses noted a lift in all indicators other than Profits which only edged a fraction lower. Most impressive were increases in Actual Sales, Employment and Capital Investment. These indicators bode well for the December quarter GDP results which will be published next month," Mr Koukoulas said.

"The mixed news on the economy should ensure the RBA leaves official interest rates on hold at its meeting today and probably for many months to come," Mr Koukoulas added.

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For more information please contact:

Stephen Koukoulas

stephen@thekouk.com  

+61 467 647 508

 

James Malkin

malkinj@dnb.com.au
+61 3 9828 3273


The latest D&B Business Expectations Survey shows:

Expectations index for the June quarter 2016:

·         The Employment Expectations Index has increased to 13.7 points, up from 12.0 points in the previous quarter but down from 16.8 points a year ago.

·         The Sales Expectations Index has dropped to 27.0 points, down from 32.7 points in the previous quarter and 32.7 points a year ago.

·         Profits expectations for the quarter have fallen to 15.4 points, compared to 18.5 points in the previous quarter and 18.1 points at the same time last year.

·         Plans for Capital Investment are also down, with the index at 10.0 points from 12.6 points in the previous quarter, and 12.6 points in Q2 2015.

·         The Selling Prices Expectations Index has increased to 19.0 points, up from 15.1 points in the previous quarter but down from 23.5 points at the same time last year.

Issues expected to influence operations in the June quarter 2016:

·         60.9 per cent of businesses are more optimistic about growth in the next 12 months compared to 2015, while 32.0 per cent are less optimistic and 7.1 per cent are undecided.

·         Consumer confidence (40.6 per cent) is identified as the issue most likely to influence business operations in the next quarter, followed by level of the Australian dollar (15.2 per cent) and cash flow (8.9 per cent).

·         23.9 per cent of businesses see weak demand for their products and services as the biggest barrier to growth in the year ahead, while 13.0 per cent see utilities and operational costs as the biggest barrier.

·         31.9 per cent of businesses reported having a customer or supplier that became insolvent, or was otherwise unable to pay them in the past year.

·         51.5 per cent of businesses would choose to miss payments to trade suppliers if unable to pay all their bills on time, followed by a business credit card (18.2 per cent).

·         25.6 per cent of businesses would prefer a higher Australian dollar and 17.9 per cent a lower dollar, while 52.4 per cent think that it doesn’t matter. 4.1 per cent are unsure.

·         12.3 per cent of businesses intend to seek finance or new credit in the quarter ahead to help their business grow, while 79.7 per cent will not, and 8 per cent are undecided.

Actual results reported for the December quarter 2015:

·         Actual employment for the December quarter was up significantly, with the index at 9.7 points, compared to 5.5 points in the previous quarter, but down from 12.4 points last year.

·         Sales activity was up slightly at 22.6 points, compared to 19.1 points in the previous quarter, but down from 24.7 points last year.

·         The Actual Profits Index decreased from 8.5 points in Q3 2015 to 7.4 points, and 11.6 points recorded at the same time last year.

·         Capital Investment activity increased to 11.9 points, up from 10.8 points in the previous quarter, but down from 12.5 points last year.

·        Selling prices were up slightly, with the index at 13.5 points compared to 13.3 points in the previous quarter, but down from 16.4 points last year.

 

 

 


About Dun & Bradstreet
Established in 1887, Dun & Bradstreet is Australia and New Zealand's longest established credit information bureau. Backed by its extensive financial database, D&B helps businesses to make informed credit decisions, and consumers to access personal credit information.

D&B works across the entire credit lifecycle to deliver data-driven solutions in sales and marketing, credit reporting and debt management. Through analysis of financial and behavioural information, D&B also provides current and predictive assessments of the economy, business conditions and credit activity.


About the survey

 

Each month business owners and senior executives representing the manufacturing; wholesale; retail; construction; transport, communications and utilities; finance, insurance and real estate; and services sectors across Australia are asked if they expect increases, decreases or no changes in their upcoming quarterly sales, profits, employment, capital investment and selling prices. Since its introduction in Australia in 1988, the survey has proven to be a highly reliable measure of economic performance.

 

The index figures used in the survey represent the net percentage of survey respondents expecting higher sales, profits, etc., compared with the same quarter of the previous year. The indices are calculated by subtracting the percentage of respondents expecting decreases from the percentage expecting increases. The Business Expectations Index is a composite of four of the five indices surveyed: sales, profits, employment and capital investment.

 

Methodology

 

Each month D&B asks a sample of executives if they expect an increase, decrease or no change in their quarter-ahead sales, profits, employees, capital investment and selling prices compared with the same quarter a year ago.

 

The executives are also asked for actual changes over the twelve months to the latest completed quarter.

 

The Australian survey began in March 1988 obtaining some 900 responses in the third month of each quarter. Since the middle of 1999, the survey has been conducted monthly, initially with about 300 responses each month. From September 2000, responses have been obtained from 400 executives each month.

 

From July 2005, to simplify the interpretation of the survey data, the results have been presented as a sequence of preliminary, interim and final indexes. The 400 responses from the first month of each quarter give preliminary estimates of the quarter-ahead expectations and the quarter behind actual indexes. The 400 responses from the second month of the quarter are combined with those from the first month as interim estimates of the indexes based on 800 responses. The 400 responses from the third month are combined with those from the first two months to give the final expectations and actual indexes based on all 1,200 responses obtained during each quarter.

 

In this issue, the preliminary indexes for the latest quarters are based on approximately 400 responses obtained during January 2016.

 

 

 

 

 

Charts and tables

 

It is common practice to present the results of business expectations surveys as indexes showing the net balance of the positive and negative responses. However, this method of aggregating responses loses relevant information about the relative proportions and rates of change of the two (positive and negative) groups.

 

Accordingly, the detailed charts at the top of pages seven to 11 in the D&B National Business Expectations Survey show separately the positive and negative components of each of the various indexes. These charts help provide a better insight into the expectations and performance of Australian business than that shown by movements in the simple aggregation of the positive and negative responses.

 

The aggregate net balance indexes are shown in the charts at the bottom of pages six to 10.

 

About Dun & Bradstreet

 

Established in 1887, Dun & Bradstreet is Australia and New Zealand's oldest credit information bureau. Backed by its extensive financial database, D&B helps businesses to make informed credit decisions, and consumers to access personal credit information.

D&B works across the entire credit lifecycle to deliver data-driven solutions in sales and marketing, credit reporting and debt management.

 

Through analysis of financial and behavioural information, D&B also provides current and predictive assessments of the economy, business conditions and credit activity.


Sales outlook

(Quarterly Net Index) (27.0 points, down from 32.7)

The positive and negative components of the D&B net indexes are shown in the adjacent chart.

 

Expectations

The June quarter 2016 Sales Expectations Index is 27.0 points, down from 32.7 points in the previous quarter and 32.7 points in the year prior.


The index is now 12.9 points above its 10-year average of 14.1 points.

 

39.8 per cent of businesses expect an increase in their sales, while 12.8 per cent forecast a decrease, compared to the same time last year.

 

Actual performance

The Actual Sales Index for the fourth quarter of 2015 is 22.6 points, up from 19.1 points in the previous quarter but down from 24.7 points a year earlier.

 

42.1 per cent of firms reported increased sales in the September quarter and 19.4 per cent had decreased sales compared to the previous year.

 





Profits outlook

(Quarterly Net Index) (15.4 points, down from 18.5)

The positive and negative components of the D&B net indexes are shown in the adjacent chart.

 

Expectations

The outlook for profits in the June 2016 quarter is an index of 15.4 points, down from 18.5 points in the previous quarter and 18.1 points last year.

 

The outlook for profits is 9.7 points above the 10-year average index of 5.7 points.

 

31.1 per cent of businesses expect an increase in their profits during the quarter ahead, while 15.7 per cent forecast a decrease, compared to last year.

 

Actual performance

The Actual Profits Index for the December 2015 quarter is 7.4 points, down from 8.5 points in the previous quarter and 11.6 points recorded a year earlier.

28.1 per cent of businesses increased their profits, while 20.7 per cent experienced a decrease.

 

 




Employment outlook

(Quarterly Net Index) (13.7 points, up from 12.0)

The positive and negative components of the D&B net indexes are shown in the adjacent chart.

 

Expectations

The employment outlook for the June quarter 2016 has increased to 13.7 points, up from 12.0 points in the previous quarter but down from 16.8 points a year earlier.

 

The outlook for employment is 11.4 points above the 10-year average index of 2.3 points.

 

Some 22.0 per cent of executives expect to employ more staff compared to a year ago, while 8.4 per cent expect to decrease their staff numbers.

 

Actual performance

In the December quarter 2015, 22.7 per cent of businesses hired new staff, compared to the 13.1 per cent that reduced their employment levels.

 

At 9.7 points, the actual employment index is up from the 5.5 points last quarter but down from the 12.4 points recorded at the same time last year.

 

 



Capital Investment outlook

(Quarterly Net Index) (10.0 points, down from 12.6)

The positive and negative components of the D&B indexes are shown in the adjacent chart.

 

Expectations

The capital investment outlook for the June quarter 2016 is 10.0 points, down from 12.6 in the previous quarter and 12.6 points last year.

 

The outlook for capital investment is 3.9 points above the 10-year average index of 6.1 points.

 

While 20.3 per cent of businesses expect an increase in their investment level, 10.3 per cent forecast a decrease compared with a year earlier.

 

Actual performance

For the December quarter 2015, the actual index for investment is 11.9 points, up from 10.8 in the previous quarter but down from 12.5 a year ago.

 

22.1 per cent of firms increased their capital investment in the December quarter, while 10.1 per cent decreased capital spending.

 

 





Selling Prices outlook

(Quarterly Net Index) (19.0 points, up from 15.1)

The positive and negative components of the D&B net indexes are shown in the adjacent chart.

 

Expectations

The Selling Prices Expectations Index for the June quarter 2016 is 19.0 points, up from 15.1 points in the previous quarter but down from the 23.5 points recorded a year earlier.

 

The outlook for selling prices is 8.8 points lower than the 10-year average of 27.8 points.


The proportion of firms expecting to have higher selling prices in the quarter ahead is 27.8 per cent, with 8.8 per cent expecting to have lower prices.

 

Actual performance

At 13.5 points, the actual Selling Prices Index for the December 2015 quarter is up from 13.3 points in the previous quarter but down from 16.4 points last year.

 

23.5 per cent of businesses increased the level of their selling prices, while 9.9 per cent had decreased, compared to the same time the previous year.