D&B survey confirms recessionary conditions

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From the monthly Dunn and Bradstreet Business Expectations Survey:

Business expectations for the final quarter of the year have fallen flat in a sign that the economy’s long-awaited revival will not occur in 2013. The outlook for the remainder of the year suggests that businesses do not view the conclusion of this month’s federal election as a potential springboard for the economy. Businesses also appear to consider the Reserve Bank’s latest rate cut as reason for continued caution, rather than investment. With just five per cent of businesses optimistic about increased growth in the final quarter of the year compared to 2012, Dun & Bradstreet has found that expectations for sales, investment and employment in particular are flat and at a low level. The services and wholesale sectors are the least positive, with just two per cent optimistic about growth in the final quarter of 2013. Manufacturing businesses, supported by a currency moving below US90 cents, are the most upbeat, with 10 per cent more optimistic compared to a year earlier. D&B’s latest Business Expectations Survey shows the sales index sliding downwards from 4.5 points to 3.5, with the number of business anticipating increased sales activity dropping from 18 per cent in the previous quarter to 11 per cent in Q4. With just two per cent of businesses planning to increase spending next quarter, the capital investment index has remained in negative territory and relatively unchanged at -1.3 points. Additionally, with just three per cent of companies intending to hire new staff in the final quarter of the year, the employment index has failed to move into a positive range, sitting at -2.8 points compared -3.3 a quarter earlier.

Blow me down with a feather. It’s not fair to say that business expectations have “fallen flat” as if they were rising. They’ve been in a downtrend all year:

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As we know, the nation’s other major business survey from the NAB has been signaling recessionary conditions. If we look at actual survey results compared with expected in the D&B version, that case is clear here as well. For sales:

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For employment:

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For capex:

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Against the recession case, profits and selling prices are OK:

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More evidence of recessionary conditions is found in business payment times and cash flow issues:

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D&B has found that operating costs and cash flow are the current significant issues impacting Australian businesses. According to the Business Expectations Survey, 45 per cent of businesses view operating costs as their biggest barrier to growth in the year ahead, while 64 per cent expect cash flow will be an issue.

Even the glass over-flowing Kouk struggles to put lipstick on this pig:

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“The general tone for the business sector is subdued with no signs of a broad-based pick up in optimism in the key indicators,” said Stephen Koukoulas, Economic Adviser to Dun & Bradstreet.

“That said there has been no further deterioration in business expectations over the past few months which offers some hope that the lower Australian dollar and low interest rates are slowly impacting on the real economy.”

“The news from the business expectations survey is, in this instance, unlikely to have a significant effect on the interest rate deliberations of the RBA as it meets today to consider monetary policy settings,” Mr Koukoulas added.

“The evidence of relatively stable conditions this month fits with the broader macroeconomic picture which points to the economy still growing at a pace a little below trend but with the odd suggestion that a turning point may soon emerge.”

We’ll know more about whether the economy is growing a little or a lot below trend tomorrow with the release of the national accounts. Current estimates range from 0.2% to 0.6% for the quarter. I’m at the bottom end but as I always say, GDP is a lottery.

Economic revival to skip 2013 as business outlook goes flat – D by Lauren Frazier

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.