Australian business expectations are sliding

Getty/Bryn Lennon

Australian businesses reported a slide in expectations about their operating environment over the next three months according to the latest release of the Dun and Bradstreet June Business Expectations Survey.

The survey, taken before the recent Brexit vote and the results from the weekend’s Federal election were known, shows respondents expect sales and selling prices to fall, with those expectations at the lowest level since 2014.

On the positive side, and somewhat incongruously, given the expectations, businesses did report they are likely to increase capital investment in the months ahead.

The wash up, however, was that the Expectations index, the average of the survey’s measures of sales, profits, employment and capital investment, dipped to 12.3 points for the third quarter of 2016, down from to 12.7 points in Q2 2016, and more than 5 points below the 17.6 point print for the third quarter of 2015.

The trouble for business – and whoever forms government – is that the actuals index halved to 6.1 points from 12.7 points last quarter. That deterioration belies the relative strength of business conditions reported in the NAB’s business survey, which economists will be watching closely when it is released later this month to see if it confirms this deterioration in business conditions.

More problematic is that the survey also showed that the Actual Employment Index fell to to 2.3 points – its lowest level since late 2013. The construction and retail sectors are reporting more decreases than increases in staff numbers.

Actual profits are also down with the print of 1.1, a four-year low.

Interestingly while the survey has a somewhat downbeat feel to it, Dun and Bradstreet reported that “62% of businesses are more optimistic about growth in the next 12 months compared to 2015, while 29% are less optimistic and 9% are undecided.”

So it’s not all bad news.

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