Business optimism has dropped dramatically according to surveys by Dun & Bradstreet and the Australian Chamber of Commerce and Industry, with small- and medium-sized businesses hit the hardest.
Dun & Bradstreet’s Business Expectations Survey published yesterday revealed businesses’ projections for sales and profits have fallen 11 points, a significant contrast to the five quarter high in sales expectations for the June quarter.
One in four firms now anticipates a decrease in sales during the September quarter and a similar number expect to deliver lower profits.
The fall in sentiment comes as one in three Australian businesses expect some form of negative impact from the high dollar, up nine percentage points in one month.
Concern over interest rates is rising most dramatically among retail and wholesale businesses, with 40% and 29% respectively indicating interest rates will have the biggest impact on operations in the coming quarter.
These figures have jumped 17 and 10 percentage points respectively.
Danielle Woods, corporate director at Dunn & Bradstreet, told SmartCompany the steep drop in business optimism reflects continued uncertainty in both the global and domestic economy.
“Two of the key things are the uncertainty over interest rates, all eyes will be on the Reserve Bank today and the flow-on over whether lending institutions pass on any cut, and we are also seeing the impact of the high Australian dollar and continued conservatism in spending,” says Woods.
Woods says although the survey asked businesses for their predictions for the future, these predictions generally came to fruition.
“We find this survey is very predictable of what does happen, over time we have seen what businesses are expecting does come to fruition,” says Woods.
“They expect sales and profits are going to fall and other indexes are down including employment indexes, inventory and selling indexes, so less firms are taking on staff and some are even saying they are going to drop prices.
“We are really starting to see businesses demonstrate their concern about what lies ahead for the rest of the year.”
Dun & Bradstreet’s findings of poor business confidence was also reflected in the ACCI Business Expectations Survey which found that while all actual and expectation indictors were stabilising and recording small improvements in the March quarter, they remained well below their five-year averages.
Comparisons by size of firm reveal that small businesses continue to experience the weakest performance relative to medium- and large-sized firms.
All firms were experiencing negative general business conditions in the March quarter, with only small business expecting their trading conditions to remain negative in June.
Greg Evans, director of economics and industry policy at ACCI, told SmartCompany the results were “really a repeat” of the findings of many recent business surveys.
“This survey did show a slight upturn in some indicators, but most indicators are well below average and some significant indexes are still contractionary; most importantly, the business view of overall conditions, sales revenue and profitability,” says Evans.
“Clearly what the survey also indicated is that lack of business confidence is having a more pronounced effect with respect to small- and medium-size enterprises.
“They have less financial resilience than larger companies and I think small business tend to congregate in those areas affected by low consumer demand like retail, hospitality and housing construction.
“Continuing active higher interest rates and concern about whether commercial banks will pass through rate reductions and apprehension with regard to the upcoming carbon tax are also factors.
“To some extent also domestic political uncertainly is also affecting conditions whereas, towards the end of last year, it was more about international circumstances, but there has been a shift.”