EMBARGOED: 1.

00am, Tuesday 3 September 2013

MEDIA RELEASE
EMBARGOED 1:00am, Tuesday 3 September 2013

ECONOMIC REVIVAL TO SKIP 2013 AS BUSINESS OUTLOOK GOES FLAT

Business expectations for the final quarter of the year have fallen flat in a sign that the economys long-awaited revival will not occur in 2013. The outlook for the remainder of the year suggests that businesses do not view the conclusion of this months federal election as a potential springboard for the economy. Businesses also appear to consider the Reserve Banks latest rate cut as reason for continued caution, rather than investment. With just five per cent of businesses optimistic about increased growth in the final quarter of the year compared to 2012, Dun & Bradstreet has found that expectations for sales, investment and employment in particular are flat and at a low level. The services and wholesale sectors are the least positive, with just two per cent optimistic about growth in the final quarter of 2013. Manufacturing businesses, supported by a currency moving below US90 cents, are the most upbeat, with 10 per cent more optimistic compared to a year earlier. D&Bs latest Business Expectations Survey shows the sales index sliding downwards from 4.5 points to 3.5, with the number of business anticipating increased sales activity dropping from 18 per cent in the previous quarter to 11 per cent in Q4. With just two per cent of businesses planning to increase spending next quarter, the capital investment index has remained in negative territory and relatively unchanged at -1.3 points. Additionally, with just three per cent of companies intending to hire new staff in the final quarter of the year, the employment index has failed to move into a positive range, sitting at -2.8 points compared -3.3 a quarter earlier.

Business expectations: Q4 2013

35 30 25 20 15 10 5 0 -5 Mar-11 Mar-12 May-11 May-12 Mar-13 Jan-11 Jan-12 Jan-13 May-13 Nov-12 Nov-10 Nov-11 Nov-13 Jul-12 Sep-10 Sep-11 Sep-12 Jul-13 Jul-11 Sep-13

Sales

Employment

Selling prices

Profits

Capital investment

Sales expectations in the construction sector are the lowest of the industries surveyed, with the index falling noticeably from the previous quarter, from 13.3 points to -1.1. Three per cent of construction firms anticipate higher sales in Q4, a sharp reduction from the 26 per cent in the

EMBARGOED: 1.00am, Tuesday 3 September 2013

MEDIA RELEASE
previous quarter. Similarly, the percentage of businesses in the services sector anticipating improved sales dropped from 21 per cent to seven per cent quarter-on-quarter. The year-end outlook for businesses is not particularly cheery, said Gareth Jones, CEO of credit information bureau Dun & Bradstreet. We are seeing something of a holding pattern develop when it comes to business expectations, with little movement up or down in the surveys series of forward-looking indices. Its been a trying year for many companies, with concerns about cash flow, operating costs and weak demand emerging as constant themes. As a consequence weve been seeing companies focusing on paying down their debt, managing expenses and focusing on core operations, to the detriment of investment and employment. It may be that we need to wait until the Christmas and New Year period before businesses begin to leverage the currently low borrowing costs, begin investing and hiring again, Mr Jones added. The low levels of optimism follow a year in which business expectations have tracked downwards before stabilising at a relatively low level in Q4. This year the Business Expectations Survey indices for sales, employment and investments all reached their lowest levels in three years, while the selling prices index reached a 24-year-low in the middle of 2013. Businesses will be hoping that the New Year brings new cause of optimism to support the traditional pick-up in consumer spending during the summer months. Necessary to this will be a capacity to better negotiate the high operating costs and cash flow issues that are limited business activity. D&B has found that operating costs and cash flow are the current significant issues impacting Australian businesses. According to the Business Expectations Survey, 45 per cent of businesses view operating costs as their biggest barrier to growth in the year ahead, while 64 per cent expect cash flow will be an issue.

Biggest barrier to growth

3% 3% 5% 9% 45% 25% 10%
No major barrier Not sure Access to skilled labour Access to funding Demand for products Outstanding accounts reivables Operating costs

With D&B also finding that companies are paying their invoices in an average of 54 days, or more than three weeks beyond standard terms, it is unsurprising cash flow is a significant issue. Late payments withhold millions of dollars from businesses and the economy especially significant at a time when growth is weak and employment edging upwards. The general tone for the business sector is subdued with no signs of a broad-based pick up in optimism in the key indicators, said Stephen Koukoulas, Economic Adviser to Dun & Bradstreet.

EMBARGOED: 1.00am, Tuesday 3 September 2013

MEDIA RELEASE
That said there has been no further deterioration in business expectations over the past few months which offers some hope that the lower Australian dollar and low interest rates are slowly impacting on the real economy. The news from the business expectations survey is, in this instance, unlikely to have a significant effect on the interest rate deliberations of the RBA as it meets today to consider monetary policy settings, Mr Koukoulas added. The evidence of relatively stable conditions this month fits with the broader macroeconomic picture which points to the economy still growing at a pace a little below trend but with the odd suggestion that a turning point may soon emerge.

EMBARGOED: 1.00am, Tuesday 3 September 2013

MEDIA RELEASE
The latest D&B National Business Expectations Survey shows:
Outlook for the December quarter 2013 The employment expectations index has increased slightly, but remains in negative territory at -2.8 points. The sales index has fallen marginally to 3.5 points, from 4.9 in the previous quarter. Profit expectations for the next three months have lifted, with the index increasing from 13.2 points to 13.8. Plans for capital investment have increased slightly compared to the previous quarter, easing up to an index of -1.3. After rising during the previous quarter, the selling prices index has edged downwards from 9.4 points to 8.3.

Issues expected to influence operations in the December quarter 2013 64 per cent of businesses expect cash flow to be an issue for their operations in the quarter ahead, with 17 per cent expecting it will have a significant negative impact. 57 per cent of businesses expect no impact from the level of the Australian dollar, while 12 per cent expect a small positive impact. 59 per cent of businesses do not intend to seek finance or new credit in the quarter ahead to help their business grow. Utilities and operational costs were identified as the biggest barrier to growth (45 per cent), followed by a slow growth in demand for products (25 per cent). 25 per cent of businesses intend to delay significant business decisions or investments until after the federal election, while 36 per cent do not.

Actual results for the June quarter 2013 Actual employment levels decreased from -4.8 points in Q1 to -7.6 points, the fifth consecutive quarter that the index has been in negative territory. Sales activity declined steeply, with the index dropping to -10.7 points, its lowest point in four years. Profits stabilised in the June quarter following a fall in the previous quarter, with the index lifting from 8.5 points to 8.8. Capital investment also stabilised, remaining relatively flat at -5.6 points compared to -6.0 points in the previous quarter. Selling prices increased during the June quarter, rising from 4.8 points to 8.5.

About Dun & Bradstreet Established in 1887, Dun & Bradstreet is Australia and New Zealand's oldest credit information bureau. Backed by its extensive financial database, D&B helps businesses to make informed credit decisions, and consumers to access personal credit information. D&B works across the entire credit lifecycle to deliver data-driven solutions in sales and marketing, credit reporting and debt management. Through analysis of financial and behavioural information, D&B also provides current and predictive assessments of the economy, business conditions and credit activity.

MEDIA RELEASE
About the Survey Each month business owners and senior executives representing the manufacturing; wholesale; retail; construction; transport, communications and utilities; finance, insurance and real estate; and services sectors across Australia are asked if they expect increases, decreases or no changes in their upcoming quarterly sales, profits, employment, capital investment and selling prices. Since its introduction in Australia in 1988, the survey has proven to be a highly reliable measure of economic performance. The index figures used in the survey represent the net percentage of survey respondents expecting higher sales, profits, etc., compared with the same quarter of the previous year. The indices are calculated by subtracting the percentage of respondents expecting decreases from the percentage expecting increases. Methodology Each month D&B asks a sample of executives if they expect an increase, decrease or no change in their quarterahead sales, profits, employees, capital investment and selling prices compared with the same quarter a year ago. The executives are also asked for actual changes over the twelve months to the latest completed quarter. The Australian survey began in March 1988 obtaining some 900 responses in the third month of each quarter. Since the middle of 1999, the survey has been conducted monthly, initially with about 300 responses each month. From September 2000, responses have been obtained from 400 executives each month. From July 2005, to simplify the interpretation of the survey data, the results have been presented as a sequence of preliminary, interim and final indexes. The 400 responses from the first month of each quarter give preliminary estimates of the quarter-ahead expectations and the quarter behind actual indexes. The 400 responses from the second month of the quarter are combined with those from the first month as interim estimates of the indexes based on 800 responses. The 400 responses from the third month are combined with those from the first two months to give the final expectations and actual indexes based on all 1,200 responses obtained during each quarter. In this issue, the initial indexes for the latest quarters are based on the 800 responses obtained during JulyAugust 2013. Charts and tables It is common practice to present the results of business expectations surveys as indexes showing the net balance of the positive and negative responses. However, this method of aggregating responses loses relevant information about the relative proportions and rates of change of the two (positive and negative) groups. Accordingly, the detailed charts at the top of pages five to nine in the D&B National Business Expectations Survey show separately the positive and negative components of each of the various indexes. These charts help provide a better insight into the expectations and performance of Australian business than that shown by movements in the simple aggregation of the positive and negative responses. The aggregate net balance indexes are shown in the charts at the bottom of pages 6 to 10. About Dun &Bradstreet Established in 1887, Dun & Bradstreet is Australia and New Zealand's oldest credit information bureau. Backed by its extensive financial database, D&B helps businesses to make informed credit decisions, and consumers to access personal credit information. D&B works across the entire credit lifecycle to deliver data-driven solutions in sales and marketing, credit reporting and debt management. Through analysis of financial and behavioural information, D&B also provides current and predictive assessments of the economy, business conditions and credit activity.

Sales outlook
(Quarterly Net Index) (Down from 4.9 points to 3.5) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The December quarter 2013 sales expectations index is 3.5 points, down from 4.9 in the September quarter 2013. The index is now below the 10-year average of 11. 11.3 per cent of businesses expect an increase in their sales for the June quarter, while 7.8 per cent forecast a decrease, compared to the previous time last year. Actual performance The actual sales index for the June quarter 2013 is -10.7 points, down from 7.0 points in the December quarter 2012. 14.8 per cent of firms had increased their sales in the June quarter and 25.5 per cent had decreased sales compared to the previous year.

D&B National Business Expectations Survey conducted JulyAugust 2013

Profits outlook
(Quarterly Net Index) (Down from 13.9 to 13.8) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The outlook for profits in the December 2013 quarter is an index of 13.8 points, a 0.1 decrease from the previous quarter. The outlook for profits is nine points above the 10-year average index of 5. 23.1 per cent of businesses expect an increase in their profits during the September quarter, while 9.3 per cent forecast a decrease, compared to last year. Actual performance The actual net profits index for the June 2013 quarter is 8.9, up 0.4 points on the previous quarter. 32.1 per cent of businesses increased their profits, while 23.2 per cent experienced a decrease.

D&B National Business Expectations Survey conducted JulyAugust 2013

Employment outlook
(Quarterly Net Index) (Up from -3.3 to -2.8) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The employment outlook for the December quarter 2013 has risen marginally to -2.8 points up from -3.3 in the previous quarter. 2.6 per cent of executives expect to employ more staff than a year ago, while 5.4 per cent expect to decrease their staff numbers. Actual performance In the June quarter 2013, 6.0 per cent of businesses hired new staff, compared to the 13.6 per cent that reduced their employment levels. At -7.6, the actual index has decreased 2.8 points from the previous quarter.

D&B National Business Expectations Survey conducted JulyAugust 2013

Capital Investment outlook

(Quarterly Net Index)(Up from -1.5 to -1.3) The positive and negative components of the D&B indexes are shown in the adjacent chart. Expectations The capital investment outlook for the December quarter 2013 is up from -1.5 points to -1.3. 1.5 per cent of businesses expect an increase in their investment level, while 2.8 per cent forecast a decrease compared with a year earlier. Actual performance For the June quarter 2013, the actual index for investment is -5.6. 4.3 per cent of firms increased their capital investment in June while 9.9 per cent decreased capital spending.

D&B National Business Expectations Survey conducted JulyAugust 2013

Selling Prices outlook

(Quarterly Net Index) (Down from 9.5 to 8.3) The positive and negative components of the D&B net indexes are shown in the adjacent chart. Expectations The selling prices expectations index for the December quarter 2013 is 8.3 points, down from a level of 9.5 in the previous quarter. The proportion of firms expecting to have higher selling prices in the June quarter 2013 is 11.8 per cent, with 3.4 per cent expecting to have lower prices. Actual performance At 8.5 points, the actual prices index for the June 2013 quarter has increased by 3.5 points on the previous quarter. 18.0 per cent of businesses increased the level of their selling prices, while 9.4 per cent had decreased, compared to the same time the previous year.

D&B National Business Expectations Survey conducted JulyAugust 2013

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