Companies gloomy on our cautious spending habits of today
CAUTIOUS spenders are causing Australian businesses to lower their profit expectations.
Findings from Dun & Bradstreet's National Business Expectations Survey have revealed a new low for selling price expectations and deep concerns from businesses about their operating cash flow.
Australian businesses have pulled back their profit expectations for the coming months as they anticipate modest sales activity, difficult trading conditions and subdued consumer activity.
After showing signs of optimism leading into the New Year, businesses have lowered their profit outlook for the June 2013 quarter, while also reporting lower-than-expected actual profits for the December 2012 quarter.
The D&B profit expectations index has fallen sharply.
This movement comes in the wake of declining expectations for sales and selling prices, and a persistent, conservative approach to spending from consumers.
The outlook for sales has declined for a second consecutive quarter. The fall suggests businesses are adjusting their expectations to a continued period of restrained consumer spending and sentiment.
The Consumer Credit Expectations Survey revealed this ongoing mood of caution from consumers, with fewer Australians taking on debt and soft demand for credit as part of a shift towards more conservative spending.
In apparent efforts to stimulate activity, businesses have again lowered expectations for their selling prices.
More than 68% of executives have indicated that cash flow will be an issue for their business's operations for the June 2013 quarter, while more than 28% rate outstanding accounts receivables as their biggest barrier to growth. In further signs of a conservative approach, D&B's survey has found 33% of businesses plan to take advantage of interest rate levels to pay off more debt, compared to the 10% that will use the low rate to increase their borrowings.
According to Stephen Koukoulas, economic adviser to Dun & Bradstreet, the Business Expectations Survey presents a disconcerting view of the economy in the early months of 2013.
"While a further interest rate cut is unlikely given the improving global economy and strength in financial markets, the Business Expectations Survey results suggests the risks ahead are for a slowing in sales and capital investment in the next few months," he said.