Economy

Prices to soar across the economy in early 2009 as companies fight for survival

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A new survey of managers and executives has found that a staggering 82% of businesses will lift their prices in the first three months of 2009 as companies fight desperately to protect their profitability.

A new survey of managers and executives has found that a staggering 82% of businesses will lift their prices in the first three months of 2009 as companies fight desperately to protect their profitability.

The revelation is contained in Dun & Bradstreet’s latest national business expectations survey, which shows 54% of firms anticipate a downturn in sales in the March 2009 quarter, while 58% expect profits to fall.

The outlooks for employment and capital investment also remain firmly in negative territory.

But the big surprise from the survey is the jump in the number of executives preparing to raise prices in the first three months of 2009. The 82% reading is the highest in the 20-year history of the D&B survey.

D&C chief executive Christine Christian says struggling companies have little option but too boost prices in early 2009.

“The overriding factor is the margin erosion that has been experienced by many businesses in the last 12 months. They’ve seen interest rates go up in the first half of this year, they’ve seen wages growth and sales have been down.

“Most businesses will say they have no choice but to raise prices just to stay in the game.”

Another factor behind the coming price rises is the sharp fall in the Australian dollar, with 75% of respondents reporting this has had a negative impact on their business.

Christian says wholesalers have been particularly hard hit by the dollar’s slide, as highlighted by the recent collapse of fish importer Aquarium Industries.

The survey’s warnings of widespread price rises in early 2009 provide businesses with an opportunity to act quickly and buy now to lock in current prices. Whether it’s sealing a deal with your key suppliers or simply filling the stationary cupboard, make sure you get it done before Christmas.

“This is a great opportunity, particularly for small businesses,” Christian says. “Now is the time to lock in major supply contracts, and given the climate, it’s a perfect time to start negotiations and drive a great deal.”

The only exception to this is the retail sector. “For retailers in particular that’s a dangerous game to play. If stock is sitting in your warehouse and it’s not moving, it’s costing you money.”

Christian describes next February and March as “the moment of truth” for the Australian economy.

She argues that by then the Christmas retail rush will be over, the redundancy cheques from those people laid off in the second half of 2008 will have run out, and the debts incurred over the holiday period will be falling due.

“Take it from us – our largest referrals for debt collection are in the February and March timeframe.

“That’s when we are going to be able to see whether Australia is going to be ride out this storm.”

 

 

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