Business conditions hit recession-like lows
Tuesday, 8 July 2008
James Thomson
It’s getting very gloomy out there. Surveys from Dun & Bradstreet and NAB show that business conditions have now reached lows not seen since the economic downturns of 2000-01 and 1990-91.
NAB’s monthly business survey recorded a “sharp and unexpected” fall in business conditions in June, with conditions falling seven points to zero points – the worst monthly outcome since 2001. Business conditions are now 20 points lower than the peak in October 2007, and the fall since then represents the biggest six-month deterioration since the economic slowdowns in 2000/01 and 1990/91.
According to the survey, growth in both sales and profits moderated significantly further in June, jobs were shed for the first time in over six years while purchase cost pressures intensified and inflation edged higher.
Business confidence slumped five points to -9 index points in June, the lowest level since the temporary fall associated with the 11 September terrorist attacks in 2001.
Meanwhile, the latest Dun & Bradstreet business expectations survey for the September quarter reveals that fuel prices are hitting Australian businesses hard, with 89% indicating recent movements have had a detrimental impact on operations.
The D&B index for expected sales is down 31 points to -16, with 25% of executives expecting an increase in sales and 41% expecting a decrease. The profits index is down 24 points to -21, with 22% of executives expecting profits to rise and 43% expecting a fall.
D&B chief executive Christine Christian says the rise in petrol and other costs on one hand, and the fall in consumer confidence and sales on the other, is putting businesses in a difficult squeeze. “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.”
The survey also shows employment expectations fell 15 points to -11, with 10% of executives expecting an increase in staff and 21% expecting a reduction.
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