Business confidence drops despite kind budget

Business expectations heading into the new financial year have fallen sharply, according to a survey by Dun & Bradstreet.

Business expectations heading into the new financial year have fallen sharply, according to a survey by Dun & Bradstreet.

The organisation’s Business Expectations Survey found that business executives have lowered their expectations in terms of expected sales, profits, investments and employment levels.

As a result, the Business Expectations Index dropped to 13.4 points from 20.7 points in the previous quarter and 19.5 points at the same time last year.

In addition, the survey found that actual business performance across sales, profits, employment and investment also fell, with the Business Actuals Index dropping from 15.5 points in Q4 2014 to 8.1 points in Q1 2015.

“It appears that businesses, despite stimulatory news in the budget, have shelved expansion plans until the end of this year at the earliest,” commented Gareth Jones, CEO of Dun & Bradstreet–Australia & New Zealand.

“Demand remains the key missing ingredient, as demonstrated by the latest capex figures and by what businesses are reporting through our monthly survey.

Twenty-four percent of businesses surveyed by Dun & Bradstreet reported a weak demand for their products and services as their biggest barrier to growth in the coming year.

Additionally, the mood of consumers continues to worry businesses, with 38 per cent nominating consumer confidence as the issue that will most influence their operations in the third quarter of the year.

Profit expectations across all industries have fallen, with the index moving down to 12.6 points from 18.1 points in the previous quarter and 19.9 points in the previous year.

After showing some resistance through the beginning of the year, employment plans have also dropped sharply. The Employment Expectations Index for the third quarter of the year is 8.9 points, down from 16.8 points in the second quarter and 12.7 points last year.

“The economy appears to have hit a brick wall,” said Stephen Koukoulas, Economic Adviser to Dun & Bradstreet.

“The severe slumps in expected sales and employment are particularly worrying for the business outlook, while the actual performance of the economy has also undershot prior expectations.”