Weak outlook: firms slash profit expectations
Businesses have slashed their profit expectations, amid declining sales and intense price discounting.
The Dun & Bradstreet Profit Expectations Index, released on Monday, fell 12 points to an index level of 11 for the three months to June 2013, indicating a smaller proportion of business expect to post increases in profits than in the previous survey.
The outlook for sales fell for a second straight quarter, to an index level of 10, while the outlook for selling prices fell to an index level of one, its lowest point since the survey started in 1988.
The index is compiled from the results of a survey of 1200 business owners and senior executives.
Dun & Bradstreet director of corporate affairs Danielle Woods said the index showed weak sales growth and pressure from consumers to discount prices were hurting businesses.
‘‘With forecasts for sales and prices being lowered, in tandem with a more conservative attitude to spending from Australian consumers, it appears that businesses are anticipating their profits will be squeezed,’’ she said.
Dun & Bradstreet economic adviser Stephen Koukoulas said the survey pointed to a difficult start to 2013.
‘‘The softer outlook for the bulk of indicators suggests the cooling of economic activity through 2012 has continued into the new year,’’ he said.
He said the low level of the selling prices index suggested inflation would remain weak over the coming months.
‘‘The record low reading for selling prices suggests that the official inflation rate could fall further during the first half of 2013.
‘‘If this shows up with the release of the March quarter inflation data in April, it will leave the Reserve Bank with scope to cut interest rates, if required.’’
The Reserve Bank of Australia has a target range for annual inflation of 2 to 3 per cent.