ANZ lauds business services as “story of the year”
Monday, January 21, 2013/
Small business sales rose 2.8% over the year to the December quarter, according to ANZ’s latest Small Business Sales Trends report, with business services described as “the story of the year”.
In the December quarter, sales growth continued to be the strongest in the mining states of WA (up 4.8% year-on-year) and the Northern Territory (up 6% year-on-year).
In Queensland, sales growth weakened noticeably (up just 1.4% year-on-year), while Victoria remained soft (up 2.4% year-on-year).
According to Justin Fabo, ANZ head of Australian economics, corporate and commercial, the figure for Queensland is consistent with the state’s underperforming labour market.
Meanwhile, sales growth in NSW and South Australia was relatively better, up 3.3% year-on-year and 4.1% year-on-year respectively.
But in the ACT and Tasmania, sales activity was weak. Sales were down 0.3% year-on-year in the ACT, and up just 1% year-on-year in Tasmania.
Sales of small retailers remained weak in December (up 1.2% year-on-year), with clothing, appliance and electrical, and homewares significantly underperforming.
Growth in food and services sales has been more resilient, with business services and automotive-related product sales gaining strongly in the December quarter.
Sales in business services are up 5.5% year-on-year, while automotive-related product sales are up 5.3% year-on-year.
According to Nick Reade, ANZ general manager of small business, the December figures are consistent with anecdotal feedback ANZ is hearing from its customers.
“As demand slowed in the second half of 2012, larger businesses captured a disproportionate share of consumer spending,” Reade said in a statement.
“Small business owners often can’t afford to discount their products or invest in marketing… whereas larger businesses have greater flexibility when it comes to both pricing and marketing.
“This may have been particularly pronounced during the Christmas sales period. Retail didn’t see the expected December lift, particularly in the appliances and electrical sector.”
Reade said business services is “really the story of the year”, showing strengthening numbers.
“It’s likely some of this growth is a spillover from mining,” he said.
But overall, Fabo said small business sales growth slowed significantly towards the end of 2012.
“Following the temporary jump in sales in October, aggregates sales growth in November and December slowed to a modest 1.2% year-on-year,” he said.
“Sales growth among small retailers was just 0.1% year-on-year in the last two months of the year… and there appears to have been little momentum coming into 2013.”
Fabo said the deterioration in small business sales growth is consistent with other indications of a slowing in momentum in the Australian economy.
“Given that policy easing by the RBA has so far elicited only a modest response from interest-rate sensitive sectors of the economy… and the Australian dollar is expected to further dampen activity, ANZ expects further cuts in the official cash rate,” he said.