Companies set to increase staff, investments and inventories: survey

The improving outlook for sales and profits will lead around 14% of Australian firms to increase staff numbers in the last three month of the year, according to a new survey from Dun & Bradstreet.

D&B’s Business Expectations Survey for the December quarter shows that growing confidence among SMEs is starting to translate into action, with the index that tracks employment leaping 26 percentage points since the last quarter.

While 10% of firms surveyed expect to cut staff numbers in the next three months, D&B chief executive Christine Christian says the fact that 14% of companies are looking to increase staff indicates that Australia’s long-term unemployment problem may not be as bad as first feared.

“The drastic rise in employment expectations is particularly important. Employment intentions often have a significant impact on the long-term unemployment rate, therefore the drastic improvement in this index should play a critical role in helping to reduce unemployment. After the 1991 recession it took 11 years for unemployment to return to pre-recession levels however, the current expectations suggest the return to lower unemployment figures should occur more quickly this time around.”

Capital investment expectations have also improved sharply to sit at their highest level in nine quarters: 16% of firms expect to increase investment, while 8% are planning to decrease capital investment.

Similarly, inventory expectations are at their highest level for more than four years, with 18% of executives planning to increase inventories in the last three months, against 14% planning to cut stock levels.

With the key Christmas sales period looming, the expectations of retail executives have reached the highest level in more than five years, with 22% of firms expecting to increase stock levels.

Underpinning the improved expectations around investment, hiring and inventories are the rapidly improving outlook for sales and profits.

The sales index soared 50 percentage points from the June quarter, the largest one-quarter rise in the history of the D&B survey. Forty-six percent of firms expect sales to climb in the last three months of the year, while 30% of executives are anticipating profits will increase in the December quarter.

The survey reports a mixed view of the subject of funding. While credit market conditions are becoming less of a problem for firms (39% of firms cited this as having a detrimental impact on their business, compared with 45% last quarter) there is growing concern about the impact of interest rates, with 36% of executives citing rates as the most significant challenge for their business in the coming months.

For his part, D&B’s economic consultant Dr Duncan Ironmonger, expects the RBA to keep rates on hold.

“The RBA meeting this week is unlikely to initiate a rise in rates, particularly as indications are that the annual inflation rate continues to be below the target band of 2-3%.”