http://au.news.yahoo.com//070910/2/14e4m.html

Businesses tip higher profits: survey

Businesses expect sales and profits to grow at their fastest rate in years in the remaining months of 2007, but interest rate concerns continue to cloud the rosy outlook.

A Dun and Bradstreet (D&B) survey of national business expectations for the December quarter found 42 per cent of the 1,200 businesses owners and executives surveyed expected sales to increase - the highest percentage in almost three years.

Profit expectations are the best in more than two years, with 38 per cent of respondents expecting returns to rise.

Despite these positives, D&B Australasia chief executive Christine Christian said interest rate concerns had risen dramatically.

Thirty-nine per cent of executives said interest rates were the most important influence on their business in the coming quarter, up 24 per cent since June.

"The Reserve Bank's decision to keep rates on hold this month should help to allay fears. However, businesses are likely to remain wary of another rate increase before the end of the year," Ms Christian said.

She said the problems of the US sub-prime mortgage market had resulted in a lack of liquidity in global credit markets as lenders tightened their defences, making credit more expensive.

"Accordingly, interest rates are having a more marked effect on business operations and executive concerns about further increases are showing through," she said.

Following interest rates, fuel prices were the biggest concern for 24 per cent of businesses, while 21 per cent were worried about wages growth and seven per cent said the government's industrial relations changes were their key concern.

Fuel costs have had a negative effect on 61 per cent of businesses, down six per cent since July.

Higher inflation expectations caused a four per cent increase in the number of businesses expecting selling prices to rise, with 62 per cent of firms expecting to put up their prices.

Only four per cent expect selling prices to fall in the December quarter.

Fewer firms are planning to hire new staff in the quarter, with 15 per cent of firms expecting to have fewer staff than a year ago.

Only 13 per cent expected to boost staff numbers.

The negative effect from the drought had decreased across all sectors, down 11 per cent since April to its current level of 25 per cent,

Thirteen per cent of businesses expected to increase capital investment in the quarter.