Forklift News - Business expectations for third quarter

The latest Dun & Bradstreet (D&B) business expectations survey reveals that fuel prices are hitting Australian businesses hard, with nine in 10 (89%) indicating recent movements have had a detrimental impact on operations - a 28% increase in just three months. Meanwhile, 32% of firms have noticed a slowdown in consumer spending in the past month and recent movements in the value of the Australian dollar have had a negative impact on 21% of businesses.

The September quarter is expected to bring a steep decline in sales, profits, employment growth and capital investment, with all of these indices now in negative territory.

Inflationary pressure is expected to continue at least in the short term, and 58% of executives now expect to raise selling prices in the September quarter. However, despite the increase, the index remains lower than in four of the last five quarters.

The employment index has dropped to its lowest level in 17 years, with 21% of executives expecting to have fewer staff in the quarter ahead than they did a year ago. Just 10% of businesses expect to increase employee numbers.

A significant weakening in capital investment expectations has resulted in the overall index dropping to minus seven. Around 15% of executives expect a decrease in capital investment, while just 8% anticipate an uplift.

According to Christine Christian, Dun & Bradstreet's CEO, continually escalating costs are eating away the profit margins of Australian businesses.

"Fuel prices are continuing to soar, interest rates remain steady but high, and consumer spending is dropping away - all of these factors are squeezing the profit margins of Australian businesses," says Christian.

"Executives face challenging decisions about how to manage these costs. Moves to increase prices will likely be met by customer backlash however as costs continue to rise and margins get thinner, failure to pass on these costs will have detrimental impacts on profitability."

Bumping interest rates out of the top spot for the first time in six months, 43% of executives now rate the cost of fuel as the most important influence on the business in the September quarter - this is the highest level of concern in more than a year.

With the Reserve Bank keeping interest rates on hold for four consecutive months, concerns about rates have declined. One-third (34%) of executives now indicate that interest rates are their primary concern in the September quarter, down from 47% in the previous survey. Retail executives continue to show the highest level of concern, with 45% ranking interest rates as the issue most likely to impact operations in the September quarter.

Credit market conditions continue to represent a significant concern. Two-thirds (67%) of firms surveyed indicated that a tightening credit market will have a negative impact on operations - 11% anticipate a very negative impact.

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