D&B business expectations tumble

The Dun and Bradstreet business expectations index for Q1 2016 tumbled today across most metrics. Sales:

Profits:

Employment:

Capex:

Selling prices:

The Kouk is not impressed:

According to Stephen Koukoulas, Economics Advisor to Dun & Bradstreet, “The recent political changes in Canberra have not been enough to see the business sector maintain its previously quite upbeat expectations for the economy. Indeed, since the change in leadership, the Business Expectations Index has dropped to its lowest level since the survey was conducted in the June quarter of 2015.

“The majority of businesses think that the political changes will have no impact on their activity even though one-third are expecting Mr Turnbull as Prime Minister to have a policy structure that will improve their business prospects”, Mr Koukoulas said.

“More worryingly, all of the main sub-components are trending lower; most notably, the key readings for expected sales, employment and capital expenditure are pointing down. This does not bode well for the economy as 2015 draws to an end and 2016 approaches. It is a sharp reversal from the generally upbeat tone to business expectations that prevailed throughout most of 2015,” Mr Koukoulas added.

“The faltering in business conditions leaves open the possibility of the RBA cutting interest rates some time in future, although for now, it will be hoping that its more upbeat view for the economy for 2016 will be delivered with the current level of interest rates”, Mr Koukoulas noted.

Check out finance and real estate! I’m not a fan of this index given it usually says more about current conditions than the future as too narrow to be useful as an overall economic indicator. But as a guide to the services economy it’s not bad and given that’s the only thing currently growing the sag does not bode well. Full report.