Business conditions improve for medium and large SMEs: NAB
SME business conditions bounced back in the September quarter but only for medium and larger SMEs, according to a recent NAB survey.
SME business conditions returned to average levels at +7 index points in the September quarter but the improvement was limited to medium and larger SMEs, the latest NAB SME Business Survey has revealed. Conditions for the smallest firms remain negative at -4 index points.
Both the employment and profitability indices rose, partially reversing the weak result for the second quarter, while trading conditions remained steady.
Forward orders increased in the September quarter, increasing 2 points to -2 index points while capex remains steady at +5 index points. Capacity utilisation rose to 82.6 per cent (from 82.4 per cent).
SME conditions rose across all industries except for wholesale and finance, with significant increases in health (up 28 points), accommodation, cafes and restaurants (up 16 points) and transport & storage (up 18 points). SME conditions are now only negative in property at -3 index points.
SME business confidence also improved, rising 4 points to -3 index points. SME confidence remains weak or negative across the board except for finance and accommodation, cafes and restaurants. It is still the weakest in retail at -14 index points.
This is despite the NAB Monthly Online Retail Sales Index indicating that there was a rebound in online retail sales in September.
The growth for the largest sales category, homewares and appliances, was enough to lift year-on-year growth back to positive territory, which had been negative for over a year.
NAB chief economist Alan Oster said there were some signs that the post-pandemic trough for retail may be nearing its conclusion.
He noted that retail businesses continue to face pressures from inflation, but while the improvement for SME business conditions was limited to medium and larger SMEs in this latest SME survey, it was still positive to see some improvement overall.
“SME confidence remains negative despite improving in the third quarter, which reflects the persistent concerns among firms about the outlook for the economy,” said Mr Oster.
“Forward orders also remain negative but capacity utilisation is elevated and rose in the third quarter which shows that for now the economy is proving resilient.”
Labour costs also increased in the September quarter, increasing 1.8 per cent, up from 1.5 per cent in the second quarter.
“This is similar to what we have seen in our surveys of larger firms, reflecting the impact of the minimum and award wage changes that took effect in July,” said Mr Oster.
“More broadly, inflation remained elevated in the third quarter as seen in the CPI and this was true among SMEs with price growth still elevated at 1.1 per cent in the quarter.”
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