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Downbeat businesses signal slower growth

Business

Businesses are the most pessimistic they’ve been for two years, signalling the pace of economic growth is set to slow.

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Businesses expect sales, profits, employment and capital investment to decline in the last quarter of the financial year compared to the previous three months, according to Dun and Bradstreet’s (D&B) latest business expectations survey.

D&B economic adviser Stephen Koukoulas says the data has cast a shadow over recent stronger economic performance.

Businesses are more pessimistic about the next three months than any quarter over the past two years and, he warned, their bleak outlook signals slower economic growth in 2016.

“There has been a fall in each of the components of the Index, with the overall Business Expectations Index (BEI) slipping to its lowest level in over two years,” Koukoulas said.

“The BEI is consistent with GDP (gross domestic product) growth of around 2.5 per cent, which is a little weaker than the three per cent growth rate recorded in the year to the end of 2015.”

Retailers and service providers have become particularly pessimistic.

Retailers reported a 47 per cent decline in expectations, while service sector expectations more than halved.

In fact, construction was the only sector not to be more subdued – but it’s outlook was flat for the next quarter.

Koukoulas said it was difficult to pinpoint the reason for the negative outlook but, he suggested, suggested the upcoming federal election and global economic uncertainty may be contributing.

Despite businesses’ more downbeat expectations, most noted stronger actual performance over the 2015 fourth quarter.

In particular, the wholesale, retail, construction and services sectors said they did well.

Koukoulas said the second consecutive decline in expectations was hardly enough to trigger alarm, but it was worth noting.

“While it is not yet time to be too concerned about the slide in expectations, any further deterioration in the months ahead would present challenges for the economy and would result in the need to recast our assessment of the state of the business landscape,” he said.

D&B said 1,200 business owners and senior executives from a range of industries including manufacturing, retail, finance and real estate, took part in the March survey.

AAP

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