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Other parts of Australia’s economy shoring up sagging retail sector, Dun & Bradstreet survey says

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Australia’s economy is leaning heavily on business-to-business trade and to commerce with the emerging Asian markets to shore up the domestic market, which still is waiting for consumers to start spending again.

That’s the big trend from the latest Dun & Bradstreet Business Expectations Survey, which shows near-record expectations for sales, profits, capital investment, employment and inventories even as retailers report some of the most difficult conditions in years.

The survey, which examines the March 2011 quarter, indicates that although a positive outlook is seen in numerous areas, retailers are failing to turn strong expectations into performance. Meanwhile, firms engaged in business-to-business trade, such as manufacturers and wholesalers, had a relatively strong finish to 2010 and are upbeat about 2011.

The retail doldrums may have an upside, the survey predicted, as households save more disposable income, reduce debt and increase savings.

The distinction between retailers and the other business sectors is most apparent in sales performance. Overall expectations for sales in the quarter ahead are positive, with a net score of 31 in the survey index, a figure well above any quarter between June 2004 and March 2010. Retailers’ expectations are even stronger, with a score of 35.

However, these expectations haven’t been matched by reality. Retailers’ index for actual sales for the September 2010 quarter was eight, well below the overall index of 14. The survey also indicates that retailers might intend to reduce prices to lift sales volumes.

A similar pattern was seen in profit expectations, which saw its overall index climb to 30, its highest level in seven years. Retailers and durables manufacturers had the highest profit expectations index, at 35. Once again, though, expectation vs. results reared its head: Actual profits for durables manufacturers hit an index of 11 in September 2010, which retailers stumbled in at -1.

Overall expectations for employment were up one point to nine, compared to the December 2010 quarter. The outlook for capital investment remained low, falling four points to 13.

“During the Christmas period, there has been an understandable focus on the challenges faced by retailers, and the survey shows that retailers are preparing to discount in response to these challenges,” said Damian Karmelich, Dun & Bradstreet’s director of corporate affairs.

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