Economic conditions to deteriorate in September quarter

The news just gets worse. Two surveys out today suggest that entrepreneurs should buckle in for the hard ride ahead. The first from Dun & Bradstreet, says that economic conditions are expected to deteriorate with a rapid slowdown in activity in the September quarter.

The D&B Expectations Survey shows a steep decline in expectations for sales, profits, employment growth, and capital investment. And almost four in 10 executives have noticed a change in consumer spending, with 36% indicating they had either experienced a moderate or significant slowdown in the past month.

Expectations for sales growth have also fallen sharply, as did profit expectations. Non-durable manufacturers were particularly hit hard while durable manufacturers were the only industry sector to report positive sales growth outlook for the September quarter

The employment indicators has also reached its lowest level in more than 15 years. About 21% of executives expect to have fewer staff in the quarter ahead than they did a year ago, with just 9% expected to increase employee numbers.

“The economic slowdown that is occurring is starting to bite businesses,” says Dun & Bradsteet CEO, Christine Christian. “Many saw poor results in the March quarter and are anticipating the challenges will only increase as we head into the second half of the year.”

Interest rates topped the list of executive concerns, particularly for those in the retail sector.

Concerns about the rising cost of petrol grew, with 20% of executives now rating the cost of fuel as the most important influence on the business in the quarter ahead.

And the credit market turmoil is still a significant concern; more than half (58%) of companies surveyed indicated that a tightening credit market will have a negative impact on operations in the coming quarter.

“All eyes will be focused on next week’s federal budget, which is expected to bring cuts in personal tax rates,” says economic consultant, Duncan Ironmonger.

Meanwhile a second survey out this morning from the Australian Chamber of Commerce and Industry shows that business confidence has fallen to the lowest level since the survey began in 1994, while business conditions were at the lowest level for five years.

Cost pressures continued to mount for business with wage and non-wage labour costs at record highs. Sales, profits, employment and investment all moved down over the quarter. And investment growth was also down suggesting the capacity of the economy has not been expanding as greatly as it has previously.

The survey looked at business conditions and confidence among 2008 businesses between January to March.

Dun & Bradstreet Expectations Survey