Interest rates remain the primary cause of concern among company executives according to the latest Dun & Bradstreet survey as businesses wait for the Reserve Bank to make its next move.
Dun & Bradstreet’s latest Business Expectations survey, which examines expectations for the September quarter, is based on responses from 1200 business owners and senior executives.
The survey revealed that 27% rank interest rates as the primary influence on their business while 75% will avoid accessing credit until the RBA moves on rates.
The cash rate has been steady at 4.75% since an interest rate rise last November and economists are tipping August as the next date for a rate rise.
The survey highlights the impact a rate rise is likely to have on businesses, particularly the long-suffering retail and manufacturing sectors.
“Executives are uncertain about the start to the new financial year … anticipated interest rate rises, largely in response to the strength of the mining sector, are likely to place further pressure on the retail and manufacturing industries,” the report says.
“Sales expectations from the retail sector are in negative territory and together with a dramatic drop in anticipated sales from non-durables manufacturing businesses reflect an increasingly gloomy view from the non-mining sector.”
According to Dun & Bradstreet chief executive Christine Christian it is unlikely there will be an improvement in the service and manufacturing sectors in the near future.
“This is breeding a culture of caution among these executives … the low level of planned capital investment in the coming quarter reflects this,” she says.
The survey reveals that the capital investment expectations index has declined four points to a net index of one after a rapid decline in two quarters and is now four points below the 10-year average.
While mining companies look to boost capital investment in order to see them through the boom non-resource sector capital expenditure reflects poor sales and profit expectations, and is likely to remain depressed well into the new financial year.
Among executives’ other concerns for the upcoming quarter are wages growth and fuel prices, with 23% of firms expecting wages growth to be the primary influence on operations while 18% say fuel prices will be their main concern.
Access to credit will be the most important business influence in the quarter ahead according to 17% of firms.
Only 16% of executives surveyed are likely to seek finance or credit to grow their businesses in the upcoming quarter, with 78% not likely and 6% unsure.
Employment growth is expected to stall in the September quarter and employment expectations have entered negative territory at -3 – the first time that has happened in eight quarters.
“This transition into negative expectations for the September quarter follows on from the percentage of firms that already reduced employee numbers during the March quarter,” the report says.
Only 11% of firms increased staff during the March quarter compared to 15% that reduced employee numbers.
“A possible reduction in staff numbers in the new financial year reflects flagging profits in the majority of sectors as wage rises exacerbate an already strained area of the economy,” the report says.
There is some relief for businesses with 41% of respondents believing the consistently high Australian dollar will have a positive impact on their business in the quarter ahead.
The high dollar is expected to have a negative impact according to 25% and 33% say it will have no impact.