Business confidence among SMEs has continued to fall in the September quarter, with conditions falling in the transport, business services and health industries as businesses fear the economic turmoil plaguing Europe and the United States will spread locally.
The results from the NAB Quarterly SME Survey are just the latest in a string of disappointing data, seemingly confirming economists’ view the Reserve Bank will be well placed to cut rates by 25 basis points next week.
The NAB survey, which focuses specifically on SMEs, found that confidence fell by nine points to negative 10, while actual conditions fell by three points to negative five, after remaining steady in the previous quarter.
The result means businesses are still unable to make long-term decisions as demand remains now and global economic uncertainty becomes more of a pressing concern.
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The drop in confidence was felt among companies of different sizes. Those businesses with turnover of between $3-5 million are now the least pessimistic, but conditions actually deteriorated among all firm sizes as well.
There were lower results for profitability, employment and trading conditions, although conditions were slightly better for mid-tier firms compared to firm earning between $2-3 million, and those earning between $5-10 million.
Overall, larger firms outperformed smaller ones, although the retail, construction and wholesale industries were weak across the board.
Cashflow remained subdued, NAB said, and deteriorated “sharply” in the property services, retail, manufacturing and accommodation, cafes and restaurants sectors, while it actually grew stronger in finance, business services and construction.
Cashflows were stronger in South Australia, and in New South Wales, but remained flat in Victoria and fell in Western Australia and Queensland.
NAB identified that interest rates are seen as less of a constraint on future profits, and that availably of labour and wage costs were also less important as well. However, Government policy and regulation has become much more important.
“All industries reported government policy to be a more significant constraint in the quarter, with the exception of property services. The exchange rate and wage costs were only perceived to be minor concerns for SMEs.”
The survey also identified that SMEs have been spending less than larger firms, and that employment conditions were less varied in the September quarter. Low-tier firms reported weakest employment conditions, but were strongest among mid-tier firms.
Capacity utilisation also fell to a five-year low for low-tier firms.