SMEs expect jump in sales and profits, as customers buy up big before Christmas

Australian companies are in the mood for buying, with a new survey from Dun & Bradstreet showing 20% of companies are planning a significant re-stocking of inventories to meet an expected sharp sales boost as the Christmas period draws near.

The Dun & Bradstreet Business Expectations survey released today shows businesses are shaking off the downturn and preparing for recovery – 46% of companies expect an increase in sales in the December quarter, with 31% expecting a profit increase.

The rise in sales expectations has pushed the D&B sales index up by 51 percentage points, the largest one-quarter rise in the history of the survey.

In more signs of renewed strength in the Australian economy, capital investment expectations are at the highest level in two years, with 16% of firms predicting an increase in this area.

And in a sign that unemployment may have peaked, 16% of businesses are expecting to increase staff numbers, while 9% expect a decrease.

The strong sales expectations come on the back of June quarter actual results, where 40% of firms experienced a sales drop from the previous quarter.

“This year, as things slowly start to return to normal we’d expect to see a normal Christmas bounce in the December quarter,” Dun & Bradstreet economist Duncan Ironmonger told SmartCompany.

He says that while consumers won’t enjoy a Federal Government stimulus package in the lead up to Christmas this year, the flow on effects from last year’s package will be integral to growth in the December 2009 quarter.

“There’s no doubt about what the package has done in providing confidence, both to consumers in spending and to companies in investing in their business. So it’s pretty key,” he said.

“The key thing about restocking is that it pushes growth right through the economy, because it means retailers are buying more from their suppliers and those suppliers are buying more from the manufacturers and so on. It’s not very sexy data but it’s very important.”

Ironmonger said the survey data mirrors worldwide patterns, where a lot of current growth is happening in inventories.

But the expected large rises in sales, profits, inventories and capital expenditure contrasts with low price expectations.

“[We found] the lowest anticipation for selling prices in more than four years. If this occurs the RBA will have a difficult task deciding when to make the next move,” Ironmonger said.

Just 30% of firms expect to increase prices in the December quarter, while 9% intend to cut prices.