Australian business expectations are sliding as we head into 2016

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Australian businesses expect a deterioration in their operations during the first quarter of 2016.

That’s the message in the latest Dun & Bradstreet Business Expectations survey released this morning.

Expectations, which is the average of the survey’s sub-components on measures of sales, profits, employees and capital investment, fell for the first three months of 2016, slipping 3.1 points to 18.7. That’s a big fall but also a sharp deterioration on the Expectations survey for Q1 2015 which printed 23.9.

Actual conditions held steady at 10.5 points.

It would be easy to be disappointed in this survey given that businesses are downgrading their expectations for the future. But Dun & Bradstreet highlight in the report that the current fall is from a relatively high base.

“All indices except Selling Prices are well above their respective ten-year averages,” they said in a note accompanying the release of the survey. “At 18.7 points, the Business Expectations Index is itself 11.9 points above its ten-year average of 6.8 points.”

That’s good economic news.

But Stephen Koukoulas, economic adviser to Dun & Bradstreet, said that while the survey is off its recent highs, “business expectations remain firm, tracking solidly above the long-run averages”.

However, he added that “the disappointing aspect for the economy is that ‘actual’ conditions for sales, profits, employment and capital expenditure remain below these positive expectations”.

That’s the reality of the uncomfortable economic transition the Australian economy is facing. We have certainty about the hole the mining boom has left and the collapse about the mining investment boom but this survey, and the recent CAPEX data, highlights the non-mining sector is still not ready to step up to the plate.

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