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Employment outlook at lowest point since the GFC

Australian businesses dont plan to employ new staff in the months ahead in an indication they expect the current period of weak economic growth to continue in the new financial year. Dun & Bradstreets latest Business Expectations Survey reveals that the hiring expectations of businesses have now declined for six consecutive quarters, with the employment index for Q3 2013 falling to -3.3 points, its lowest level in four years. Excepting those in the transportation, communications and utilities sector, which recorded a flat result, businesses from all of the industries surveyed expect to decrease their employment in Q3. Companies in the construction, manufacturing and retail sectors expect the greatest level of employment reduction. With actual employment activity over the past 12-months tracking downwards with the surveys forward-looking index, these latest findings suggest that last months series of company job cuts and off-shoring announcements may not be in isolation. Last week the ABS also reported a 7.3 per cent fall in total job vacancies in the three months to May.

BUSINESSES SAY NO NEW JOBS

Operating costs, weak sales and cash-flow appear to be limiting businesses capacity to hire new staff, while an uncertain economy and approaching Federal Election are factors affecting demand for new labour. With little spark to be found in the domestic economy businesses are wary of investing, instead focusing on their core operations and controlling their costs, said Gareth Jones, Dun & Bradstreets Chief Executive Officer.

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This is a continuation of what businesses have been saying throughout the first half of the year that they wont seek new credit to grow their business and that they wont be increasing employment and other significant forms of business spending, he said. It appears businesses dont see any substantial improvement in trading conditions in the new financial year to make them prepare for growth, while the upcoming federal election is also creating uncertainty and dampening new activity. According to the Business Expectations Survey, 25 per cent of businesses view a weak demand for their products as the biggest barrier to growth in the September quarter. This is reflected in the surveys low sales expectations index, which has fallen steeply from 13.5 in the previous quarter to 4.9 points. In addition to a weak sales outlook, the profits index for the next three months has edged lower to 13.2 points, compared to 14.2 in the previous quarter. This softer outlook appears to have been impacted not just by lower sales expectations, but also the cost of doing business. Forty-two per cent of executives surveyed cite operational costs as the factor most likely to limit their future growth.

Biggest barrier to growth: September quarter 2013

Operational costs

25% 42% 4% 5% 9% 15%

Demand for products Access to skilled labour Access to funding No major barrier Outstanding accounts receivables

The business sector is unambiguously preparing for weaker activity, with broad-based declines in the key components of the D&B Business Expectations Survey, said Stephen Koukoulas, Economic Advisor to Dun & Bradstreet. Of most concern is the scaling back in employment intentions, which points to net job shedding and undoubtedly a rise in the unemployment rate in the next few months, he said. These business expectations point to the opportunity for the RBA to further cut interest rates particularly as the survey also shows weakness in expected sales and a softer profit outlook. While there appears to be some pick-up in expected selling prices on the back of the recent fall of the Australian dollar, this increase is from a historically low base. It would be unlikely to deter the central bank from cutting interest rates given the more problematic big-picture view of the economy, Mr Koukoulas added.

EMBARGOED: 1.00am, Tuesday 2 July 2013

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The latest D&B National Business Expectations Survey shows:
Outlook for the September quarter 2013 The employment expectations index has moved lower to -3.3 points, down from 0.1 in the previous quarter. The sales index has fallen to 4.9 points, compared to 13.5 in the previous quarter. Earnings expectations have weakened for the next three months, with the profits index decreasing from 14.2 points to 13.2 quarter-on-quarter. Plans for capital investment have declined for a third consecutive quarter, dropping to -1.5. The selling prices index has increased steadily from 2.5 points in the previous quarter to 9.4.

Issues expected to influence operations in the September quarter 2013 29 per cent of businesses expect cash flow will be the issue that most influences their operations, while 21 per cent report fuel prices. Of those businesses expecting cash flow to be an issue for their operations in the quarter ahead, 22 per cent expect it will have a significant negative impact. 59 per cent of businesses expect no impact from the level of the Australian dollar, while 15 per cent expect a significant positive impact. 68 per cent of businesses do not intend to seek finance or new credit to help their business grow. Utilities and operational costs were identified as the biggest barrier to growth (42 per cent), followed by a slow growth in demand for products (25 per cent). 24 per cent of businesses expect that a Coalition Party victory at the federal election will be more favourable for their operations while 38 per cent of businesses do not think the outcome of will have any affect.

Actual results for the March quarter 2013 Actual employment fell to -4.8 points in Q1, the fourth consecutive quarter the index has been in negative territory. Sales activity declined steeply with the index dropping to -7.0 points, its lowest point since Q4 2009. Profits fell from 12.5 points in the last quarter of 2012 to 8.5 in the first quarter of this year. The capital investment index dropped to -6.0 points after reaching 1.0 in the previous quarter. Selling prices increased marginally during the March quarter, rising from 4.5 points to 4.8 quarter-on-quarter.

About Dun & Bradstreet Established in 1887, Dun & Bradstreet is Australia and New Zealand's oldest credit information bureau. Backed by its extensive financial database, D&B helps businesses to make informed credit decisions, and consumers to access personal credit information. D&B works across the entire credit lifecycle to deliver data-driven solutions in sales and marketing, credit reporting and debt management. Through analysis of financial and behavioural information, D&B also provides current and predictive assessments of the economy, business conditions and credit activity.

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About the Survey Each month business owners and senior executives representing the manufacturing; wholesale; retail; construction; transport, communications and utilities; finance, insurance and real estate; and services sectors across Australia are asked if they expect increases, decreases or no changes in their upcoming quarterly sales, profits, employment, capital investment and selling prices. Since its introduction in Australia in 1988, the survey has proven to be a highly reliable measure of economic performance. The index figures used in the survey represent the net percentage of survey respondents expecting higher sales, profits, etc., compared with the same quarter of the previous year. The indices are calculated by subtracting the percentage of respondents expecting decreases from the percentage expecting increases. Methodology Each month D&B asks a sample of executives if they expect an increase, decrease or no change in their quarterahead sales, profits, employees, capital investment and selling prices compared with the same quarter a year ago. The executives are also asked for actual changes over the twelve months to the latest completed quarter. The Australian survey began in March 1988 obtaining some 900 responses in the third month of each quarter. Since the middle of 1999, the survey has been conducted monthly, initially with about 300 responses each month. From September 2000, responses have been obtained from 400 executives each month. From July 2005, to simplify the interpretation of the survey data, the results have been presented as a sequence of preliminary, interim and final indexes. The 400 responses from the first month of each quarter give preliminary estimates of the quarter-ahead expectations and the quarter behind actual indexes. The 400 responses from the second month of the quarter are combined with those from the first month as interim estimates of the indexes based on 800 responses. The 400 responses from the third month are combined with those from the first two months to give the final expectations and actual indexes based on all 1,200 responses obtained during each quarter. In this issue, the interim indexes for the latest quarters are based on the 1,200 responses obtained during April, May and June 2013. Charts and tables It is common practice to present the results of business expectations surveys as indexes showing the net balance of the positive and negative responses. However, this method of aggregating responses loses relevant information about the relative proportions and rates of change of the two (positive and negative) groups. Accordingly, the detailed charts at the top of pages five to nine in the D&B National Business Expectations Survey show separately the positive and negative components of each of the various indexes. These charts help provide a better insight into the expectations and performance of Australian business than that shown by movements in the simple aggregation of the positive and negative responses. The aggregate net balance indexes are shown in the charts at the bottom of pages 5 to 9. About Dun & Bradstreet Established in 1887, Dun & Bradstreet is Australia and New Zealand's oldest credit information bureau. Backed by its extensive financial database, D&B helps businesses to make informed credit decisions, and consumers to access personal credit information. D&B works across the entire credit lifecycle to deliver data-driven solutions in sales and marketing, credit reporting and debt management. Through analysis of financial and behavioural information, D&B also provides current and predictive assessments of the economy, business conditions and credit activity.

Sales outlook
(Quarterly Net Index) (Down from 13.5 to 4.9) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The September quarter 2013 sales expectations index is 4.9 points, down from 13.5 points in the June quarter 2013. The index is now below the 10-year average of 11. 18 per cent of businesses expect an increase in their sales for the June quarter, while 13 per cent forecast a decrease, compared to the previous time last year. Actual performance The actual sales index for the March quarter 2013 is -7 points, down from 11.8 points in the December quarter 2012. Thirty per cent of firms had increased their sales in the March quarter and 24 per cent had decreased sales compared to the previous year.

D&B National Business Expectations Survey conducted April, May, June 2013

Profits outlook
(Quarterly Net Index) (Down from 14.2 to 13.2) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The outlook for profits in the September 2013 quarter is an index of 13.2 points, a one point decrease from the previous quarter. The outlook for profits is 10 points above the 10-year average index of 5. Twenty-five per cent of businesses expect an increase in their profits during the September quarter, while 12 per cent forecast a decrease, compared to last year. Actual performance The actual net profits index for the March 2013 quarter is 8.5, down four points on the previous quarter. Thirty-three per cent of businesses increased their profits, while 25 per cent experienced a decrease.

D&B National Business Expectations Survey conducted April, May, June 2013

Employment outlook
(Quarterly Net Index) (Down from 0.1 to -3.3) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The employment outlook for the September quarter 2013 has fallen to -3.3 points, a decline of three points from the June quarter. Three per cent of executives expect to employ more staff than a year ago, while six per cent expect to decrease their staff numbers. Actual performance In the March quarter 2013, 12 per cent of businesses reduced their staff levels, compared to the seven per cent that hired more staff. At -5, the actual index has decreased by one point from the previous quarter.

D&B National Business Expectations Survey conducted April, May, June 2013

Capital Investment outlook

(Quarterly Net Index) (Down from 5 to -1.5) The positive and negative components of the D&B indexes are shown in the adjacent chart. Expectations The capital investment outlook for the September quarter 2013 is down from five points to -1.5. Five per cent of businesses expect an increase in their investment level, while seven per cent forecast a decrease compared with a year earlier. Actual performance For the March quarter 2013, the actual index for investment is -6. Eight per cent of firms increased their capital investment in Marc h while 14 per cent decreased capital spending.

D&B National Business Expectations Survey conducted April, May, June 2013

Selling Prices outlook

(Quarterly Net Index) (Up from 2.5 to 9.5) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The selling prices expectations index for the June quarter 2013 is 9.5 points, up from a level of 2.5 in the previous quarter. The proportion of firms expecting to have higher selling prices in the June quarter 2013 is 18 per cent, with eight per cent expecting to have lower prices. Actual performance At 4.8 points, the actual prices index for the December 2012 quarter has increased by 0.3 points on the previous quarter. Twenty-one per cent of businesses increased the level of their selling prices, while 16 per cent had decreased, compared to the same time the previous year.

D&B National Business Expectations Survey conducted April, May, June 2013