The Dun & Bradstreet business Expectations Survey were worrying for those looking for economic momentum into the second half of 2017.

For the full report, click on the following link. 

The key points of the release were:

Business expectations have dropped off for the September quarter following a softer-than-expected March quarter. Dun & Bradstreet’s April Business Expectations Survey shows lower actual sales, profits, employment, selling prices and capital investment in the first quarter of 2017 compared to the final quarter of 2016.

After an encouraging end to 2016 and significant optimism in the early part of 2017, the business sector has indicated a deterioration in conditions into the second half of the year. It points to a growing risk that the RBA may deliver a further interest rate cut in the months ahead which would be even more likely if inflation remains well contained, as per the results on expected selling prices.

Expectations drop 12% quarter on quarter

Business expectations for the third quarter have fallen by 12% compared to the second quarter. Sales, profits and capital investment are tipped to remain low, but businesses flagged an increase in employment numbers and selling prices.

There has been a downturn in expectations for activity into the September quarter but the falls are not yet extreme. In particular, sales expectations for the September quarter have edged low- er, but remain above the average of the past decade. It is a similar picture for expected profits which are in a clear downtrend. Expected capital expenditure has also weakened in line with the official data on private sector capital expenditure.

Construction industry bucks the trend

Construction stood out as the only sector with increasing expectations for Q3 2017 compared to Q2 2017 and Q3 2016. Year-on-year, the Construction industry experienced a more than six fold increase in business expectations.
Aided by a surge in new dwelling construction, particularly for apartments, a lift in infrastructure spending and also importantly a solid recovery in non-mining capital expenditure, the construction sector is the bright spot in the business outlook. Expected sales eased only marginally, but there was substantial strength in expected selling prices, profits and capital investment. The construction sector is also looking to boost its employment levels into the September quarter.

March quarter performance falters

Actual business activity dropped off in the March quarter 2017, with the Business Actuals Index at its lowest point in almost four years. The discrepancy between expected and actual activity has widened over the December 2016 and March 2017 quarters and is now at a two-year high. Despite a generally positive outlook for business expectations in the early part of 2017, the actual performance of the business sector slumped to its weakest level since Q2 2013. This significant shortfall in expectations was most evident in a disappointing actual result for profits, which turned negative for the first time since Q2 2011, with employment also deteriorating to a four-year low. The survey results are consistent with the economy growing, albeit at a below-trend pace.

Retail slips to lowest performance in 4 years

The Retail sector saw its Business Actuals Index sink below zero for the first time since the June quarter of 2014. The figure is currently at its lowest point in four years. The weakest segment in the survey was retail trade, with expectations weakening and the actual performance in the March quarter turning negative. This fits with the official data on retail spending which has been very soft in the post-Christmas period. Weak wages growth is dampening consumer demand as it the emergence of additional competitors into the sector. The retail sector was hardest hit by the recent rise in energy prices. 2017 looks to be a challenging year for retailers.