Sales, profit and investment expectations soar as companies ride the recovery

Australian executives and entrepreneurs are back in the mood for growth, according to the latest business expectations survey from Dun & Bradstreet.

Expectations of sales, profits and capital investment all reached their highest point in over five years, with managers in the wholesale sector the most buoyant.

However, the familiar problems with a growing economy – namely wages growth and higher interest rates – are starting to weigh on the minds of executives, with 39% saying wage growth would negatively impact their business and 31% saying higher rates would prove something of a handbrake.

D&B chief executive Christine Christian says the results of the survey shows that business believes the recovery has finally taken hold.

“There had clearly been a great deal of caution shown by Australian executives in the second half of last year, largely due to the wind down of the Government stimulus package. However much of this caution seems to have dissipated over the past quarter,” she says.

“The return in confidence in the majority of key indices such as sales, profits and employment and an improvement in long-term indicators such as capital investment and inventory demonstrates that businesses believe that this improvement will not just be short-term”

As well as the sharp improvements in sales, profit and investment expectations, employment expectations also moved higher and inventory expectations also improved.

Executives are also clearly hoping to recover profits that may have been lost when they were forced to discount during the GFC. Just over 25% of companies expect to raise selling prices in the June quarter, with just 7% set to drop their prices.

However, Christian is quick to note there are some capacity constraints building in the economy, including slow business-to-business payments, ongoing problems with accessing credit (just under 20% of respondents said this was an issue) and wage growth, created in part by a lack of skilled labour.

Concerns about some of these issues may be reflected in companies’ cautious attitude to debt, with 26% of firms planning to cut business debt levels in the next three months, compared with 17% expecting to increase debt.