Business executives are gloomy about the prospects for their companies as they expect a slump in sales and profits over the December quarter that may lead to job cuts.
According to the latest Dun & Bradstreet Business Expectations Survey, executives are worried about the tightening credit market, high petrol prices, the decline in the value of the Australian dollar and wages growth.
The survey results came out as analysts said the Australian advertising market was expected to go from bad to worse this financial year against a backdrop of a slowing consumer economy and volatility in global financial markets.
Deutsche Bank analyst Andrew Anagnostellis expects the ad market to slow further this financial year.
''Given the deteriorating and highly uncertain macro-environment, there is a real possibility that the outcome for advertising could be much worse than anticipated,'' Mr Anagnostellis said in a client note.
D&B said of the results from its survey of business executives, ''Australia's business executives are expecting a sombre lead into Christmas as movements in the Aussie dollar, high fuel prices, continued inflationary pressures and declining consumer spending hurt their sales and profits prospects.
''The December quarter is expected to bring a steep decline in sales, profits, employment growth and capital investment, with all of these indices in negative territory for the second consecutive quarter.''
Of the firms surveyed, 44 per cent expect sales to fall and 49per cent expect profits to drop.
The employment index fell to its lowest level in 17 years, with 23per cent of executives expecting to have fewer staff in the quarter ahead.
Four in 10 businesses said interest rates would be their primary issue in the quarter ahead.
Despite recent falls in petrol prices, 34per cent of businesses said fuel prices would have the greatest impact on operations.
Wages growth was the major concern for 22per cent of firms.
Sixty-nine per cent of firms said a tightening credit market would hurt their operations.
Sixty-six per cent of businesses were expecting to be forced to raise selling prices in the coming quarter, signalling that inflationary pressure would continue in the short term.
D&B chief executive Christine Christian said, ''Australian businesses are undoubtedly facing some very real challenges. Profit margins are being eroded by a slowing economy and escalating funding and goods costs, while the decline in the Aussie dollar is forcing businesses to pay more for their imports.'' Nonetheless, Ms Christian said, Australia's outlook was stable compared with other countries, and an interest rate cut should have a positive effect on spending and investment.
Mr Anagnostellis has downgraded his expectations for fiscal 2009 advertising growth from 1.6per cent to minus 1per cent.
He expects traditional media advertising to decline by 3.5per cent.
Online and pay TV were expected to grow by 10.2 per cent. Citigroup also believes the Australian ad market will slow further this financial year. AAP