Business confidence solid, but where are the jobs?

Employment expectations for the June quarter of 2017 are at a more than three-year low, according to Dun & Bradstreet’s January Business Expectations Survey.

Businesses indicated that they would slow hiring in the quarter ahead, despite increased expectations for sales, profits and capital investment. Meanwhile, companies reported higher sales in the December quarter, but lower employment levels, selling prices, profits and capital investment.

“Business expectations through to the middle of 2017 are mixed, and have taken a step down from the optimism seen at the end of 2016. Encouragingly, expected sales continue to rise at a solid pace, which points to ongoing expansion in activity into 2017,” said Stephen Koukoulas, economics adviser to Dun and Bradstreet.

“Of note also is the steady rise in expected capital expenditure, which is an encouraging aspect of the survey given how weak the official business investment data have been for the last few years.”

Dun & Bradstreet’s Business Expectations Index, the average of the survey’s measures of Sales, Profits, Employment and Capital Investment, climbed to 19.5 points for the June quarter of 2017, up 3.2 per cent from 18.9 points for the March quarter 2017 and up 53.5 per cent from the June quarter 2016 figure.

The preliminary Q2 2017 result is 10.1 points above the 10-year average of 9.1 points. The index is currently at its highest point since the December quarter of 2015, when it reached 21.8 points.

“After a minor lift, expected selling prices are moderating, which indicates that inflation will remain very low through to at least the middle of 2017. The Selling Prices Expectations Index has a good record for matching broad changes in the official CPI data,” Koukoulas noted.


Employment expectations

Plans for capital investment continue to increase as 19.4 per cent of companies stated that they will increase capital spending in June 2017 compared to June 2016, while 5.9 percent say they will lower their capital expenditure.

Expectations for profit in the June quarter are largely on par with the March quarter, with the Profit Expectations Index moving from 21.0 points to 21.5 points. However, compared to the June quarter of 2016, businesses are notably more optimistic regarding profits: the index has jumped 110.5 per cent from 10.2 points.

Despite the apparent confidence regarding sales, profits and capital investment, the Employment Expectations Index slipped to its lowest point since the December quarter of 2013. The index fell to 6.7 points for the June quarter, compared to 14.6 points in the March quarter and 8.3 points in the previous corresponding quarter.

For the coming quarter, 16.5 per cent of businesses say they intend to employ more staff than a year ago, while 9.9 percent expect to employ fewer.

“Of some concern is the pull-back in expectations for employment, which has dipped to its lowest level in over three years. This indicator fits well with the official labour force data which continues to show a sluggish pace of employment growth and a minor lift in the unemployment rate,” said Koukoulas.

“Overall, the Business Expectations Survey points to the economy continuing to grow at a moderate pace, with a generally soft tone for job creation. Inflation is expected to stay low which should influence the Reserve Bank to keep interest rates at record lows.”

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