Gloomy Outlook for the Next Quarter

Submitted by Craig Strzelecki on 10 June, 2008 - 11:30

Businesses are looking bleak. Small and medium enterprises are the worst hit with the ongoing credit crisis around the world. According to the industry survey rising fuel prices, drop in consumer spending, rising inflation and the on-going world wide credit crisis has market a dent in sale and profits figures of the company.

The Dun and Bradstreet business expectations survey shows a steep fall in sales, profits and employment growth expectations. The personal and business borrowers have also felt the brunt of on going financial scenario with higher loan costs so that banks can raise money at affordable costs. The corporate market has also locked up its financial reserves and lending has slowed due to weakening economy.

The local market activity in investment banking has also crimped due to the US sub prime crisis and resultant credit crunch. Investment banks have witness a 27 percent drop in their fees for investment banking. Local banks combined with UBS, Macquarie Group and Goldman Sachs JBWere have earned $920 million cumulatively as their fees during the first half this year as compared to $1.2 billion in the same period last year.

The hardest hit market segment has been debt capital market and equity capital market which has witnessed 55 percent and 54 percent decline respectively. Merger and acquisition income had also eased meagrely to just 7 percent. The overall scenario in investment banking clearly depicts absence of any mega deals in the country.

High petrol prices and instability of the stock market has led to volatility in the financial circles leading to increasing mistrust in the market. Business executives also feel that the rising fuel prices will hit the sales and profitability figures of the businesses. They also feel the employment growth expectations are at their lowest. Moreover, the small businesses especially with a staff of five or less are grappling under such economy to stay afloat and curb their expenditures.

On the other hand, the Reserve Bank has managed to keep the interest rates under control till date. Dun and Bradstreet survey has already confirmed the economic slow down has begun in the country and Australia’s annual growth has slowed down from 4.3 percent to 3.6 percent in March quarter.