Sectors hedge their bets despite positive outlook

Sectors hedge their bets despite positive outlook

Dun and Bradstreet’s latest Business Expectations Survey has shown that expectations for profits continue to rise, hitting a two-year high for Q2 2017. The survey shows actual results for sales and capital investment are also trending higher. An additional question regarding the company tax rate drew mixed results across sectors and locations.

“The Business Expectations Index held at a solid level, with a broadly optimistic take on the economy. The business sector is indicating that expectations for the June quarter remain buoyant, although some soft spots remain in the overall positive outlook,” said Dun & Bradstreet economic adviser Stephen Koukoulas.

Sales and profits key drivers of confidence

Sales and Profits have backed up their expectations for Q4 2016 in the form of higher Actual results. Historically this seasonal trend is followed by a sharp drop in Actual results during the following quarters.

“There is a wide divergence between expectations for business conditions and the actual outcome, with Transport, Communications and Utilities being the only sector to have the actual performance exceed expectations. All other sectors fell short of expectations. Most telling was the undershot from the Retail sector, where the actual performance of the economy in Q4 2016 fell markedly short of expectations,” Mr Koukoulas said.

Capital Investment turns corner

Capital Investment Expectations for Q2 2017 edged higher. Typically the missing piece of the puzzle for sustained economic growth, it is encouraging to see increases across consecutive quarters. Finance, Insurance and Real Estate firms, along with Wholesalers, had the brightest outlook for short-term Capital Investment plans.

Offsetting the disappointing news on employment is a further upturn in expected capital expenditure. This measure has been recovering since the middle of 2016 and it was interesting to note that one of the surprising components in the recent official GDP data was a rise, albeit moderate, in business investment.

Company tax rate impedes SME growth

Feeding into the ongoing debate regarding Capital Investment and Employment planning, we asked businesses for their take on the current company tax rate. Broadly we saw majority consensus that business sees the 30% tax rate as an impediment to future planning. There was considerable variation, however, across sectors and locations.

A significant proportion of the business sector considers the current company tax rate an impediment to their business plans, therefore the cut proposed by the government would be a welcome move. The sectors that are most impeded by the current company tax rate are Manufacturing, Transport, Communications and Utilities, and Retail. The Services sector is the least impacted by the current tax rate.

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