AUSTRALIA's economy is becoming increasingly resilient to consumer apathy as firms engaged in B2B trade and those exposed to the emerging economies of Asia keep the domestic economy powering ahead – even while retailers struggle to convince consumers to spend. Dun & Bradstreet CEO Christine Christian (pictured) comments on the two months ahead.

The latest March 2011 Dun & Bradstreet Business Expectations Survey shows near record expectations for sales, profits, capital investment, employment and inventories, while retailers report some of their most difficult circumstances for years.

The survey shows that although the positive outlook is shared across all sectors, retailers are failing to turn strong expectations into actual performance. Firms in business-to-business trade such as manufacturers and wholesalers had a relatively strong finish to 2010 and are buoyant about 2011.

While challenging for the retail sector, this trend may be positive for the broader economy as households save, reducing their debt levels and increasing the pool of savings for investment elsewhere in the economy.

The distinction between retailers and the rest is most apparent in sales performance. Expectations for sales in the quarter ahead remain positive with a net result of 31, a figure that is well above any quarter in the six years ending June 2004 through to March 2010.

Forty-eight per cent of firms anticipate increased sales while 17 per cent believe sales will fall. The sales expectations of retailers is particularly strong, with the retail sales index at 35, three points above the sales indexes for wholesalers and durables manufacturers.


The profit index has climbed to its highest level in seven years with a net index of 30 and the positive outlook shared across all sectors. Just fewer than half of firms (45 per cent) expect profits will increase during the March quarter, while 15 per cent anticipate a decrease. Retailers and durables manufacturers have the highest profit expectations indexes at 35.


Wholesalers have the highest expectations with a net index of 14 while retailers and non-durables manufacturers have the lowest inventories expectations, both with net indexes of seven. This indicates retailers will not be required to increase inventories until late 2011.


Employment expectations are up one point on the December quarter 2010, taking the net index to nine. Fifteen per cent of firms are planning to increase staff levels during the March quarter, while six percent expect to reduce employee numbers. Durables manufacturers have the highest net index at 14, while non-durables manufacturers have the lowest index of 4.

Increase in capital spending

Seventeen per cent of executives expect to increase capital spending, while 4 per cent expect to cut their level of investment. Looking at capital expectations by sector reveals that non-durables manufacturers have slightly higher expectations for capital investment than other sectors, with the net index at 15. Retailers have the lowest net index of 10.

There is a clear distinction between retailers and the rest in actual performance. The non-retail sector is driving the economy while retailers struggle with household deleveraging.

Debt reduction

Forty two per cent of executives are planning to reduce their level of debt in the next three months – a rise from 36 per cent in November. Meanwhile, just 7 per cent of firms expect to increase debt levels and 50 per cent plan to maintain current funding arrangements. In addition, 33 per cent of executives indicated that they intend to increase their cash reserves – a fall of 10 percentage points since October.


The impact of tighter lending conditions appears to be stable, with 12 per cent of executives reporting better access to credit in the last quarter and 11 per cent reporting less access. In addition, the number of firms indicating that access to credit will be the most significant influence on their business in the quarter ahead is 15 per cent (unchanged since last month).

Interest rates biggest concern

Meanwhile, 40 per cent of businesses rank interest rates as their primary concern, 25 per cent consider wages growth to be the major influence on their business and only 8 per cent believe fuel prices will have the most significant impact on operations in the quarter ahead.

The outlook for the Australian economy is for sound growth in 2011. Although consumers are saving a higher proportion of income, strong employment and income growth is continuing with only modest inflation pressure.

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