Australian businesses have moderated their expectations for the December quarter, after confidence peaked in the middle of the year.
The latest Business Expectations Survey from Dun & Bradstreet shows that businesses are less optimistic about sales and employment.
Within the headline results, there were also notable divergences in the outlook across different states and industries.
“Overall business expectations were flat into the December quarter confirming a lower level of optimism than had been evident in the June quarter, a time when expectations were at a cyclical high,” said Dun & Bradstreet economic adviser Stephen Koukoulas.
This chart shows the moderation in the survey’s headline Business Expectations Index, which has ticked slightly lower from the same time last year.
“There has been a moderate decline in expectations for sales, employment and selling price. While the declines have been moderate, the change in trend suggests a mix of slower growth in activity and employment growth and ongoing low inflation right through to the end of 2017,” Koukoulas said.
The survey is slightly at odds the most recent NAB business survey, which had its strongest reading since 2008 in July.
Despite a decline in sales and employment expectations in the Dun & Bradstreet report, the survey showed that profit expectations still edged higher for Q4 2017.
In addition, the companies surveyed indicated that they may be getting ready to spend. Compared to the same time last year, an additional 19.1% of respondents said they planned to increase capital spending in the December quarter.
That ties in with the forward guidance from ASX200 companies in the most recent reporting season, with forecasts for more capex in the year ahead.
Looking across industries, the businesses categorised as finance, insurance & real estate were once again the strongest performer.
That contrasted against the retail sector, which hit a three-year low.
Although recent retail sales data has consistently beaten expectations, the retailers surveyed were more pessimistic on sales, employment and profits.
“The strength in business expectations in the Finance, Insurance and Real Estate sector has benefited from the housing boom of the last few years,” Koukoulas said.
“This is not only in terms of general price increases, but also investor activity, new construction and the relatively high turnover rate in the sector.”
There were also stark differences in the outlook across the states.
The ACT had the highest ranking for both business expectations and actual results, while businesses in SA were the least optimistic.
“When asked whether they were more or less optimistic about business growth in 2017 compared to 2016, South Australian companies had the lowest across the country,” the report said.
“By comparison, New South Wales had the highest net score, with 75.2 percent of companies feeling more optimistic about growth 2017 than 2016.”