Below trend growth to continue
The NAB SME Survey is the leading business survey of small businesses in Australia, and complements the comprehensive Quarterly NAB Business Survey.
SME business conditions and confidence eased in the quarter, but remain upbeat overall.
The NAB SME Survey is the leading business survey of small businesses in Australia, and complements the comprehensive Quarterly NAB Business Survey. It offers a rich repertoire of insights into factors affecting smaller firms’ conditions by state, industry and size, as well as an assessment of their outlook for investment and output.
According to NAB Group Chief Economist Alan Oster, “The Q3 survey suggests a loss of momentum in SME business conditions and confidence but this is against the exceptionally strong results in Q2. Overall, conditions and confidence remain above their long-term averages which suggest relatively solid levels of underlying activity. A further narrowing in the gap between conditions experienced by SMEs and larger businesses as indicated by the NAB Quarterly Business Survey suggests that the pace of growth is now more consistent across small and large businesses.”
“However, the base of industries which reported positive conditions shrank in the quarter and this warrants close monitoring for signs of further weakening in the near future. The sustained weakness in retail conditions is of particular concern as it has the potential to affect other affiliated industries such as wholesale and transport. Meanwhile, we continue to witness strong conditions in tertiary services such as health, business and financial services,” said Mr Oster. SME business confidence eased marginally in the quarter to +5, but continues to exceed its long-term average of +2. According to Mr Oster, “The fall in SME confidence was in spite of the RBA’s 25bps cut to the cash rate in August, perhaps a reflection of the absence of a sustained depreciation in the AUD despite the rate cut.”
“In Q3, business conditions were mixed by state. NSW, Victoria and WA reported relatively stable conditions, SA improved but was still lacklustre, while Queensland deteriorated sharply. The readings for Queensland in particular have been volatile recently so we will need additional information to determine the underlying trend for the state,” said Mr Oster. NSW and Victoria continue to outperform in terms of conditions, while WA remains the weakest. “The ongoing mining downturn continues to weigh on WA conditions, while the recent improvements in commodity prices have done little to assuage the pessimism of SMEs from the state, with WA continuing to be the least confident state as well. Apart from WA, SA was the only other state to report negative confidence. Meanwhile, NSW, Victoria and Queensland tied in the top spot for confidence at +7 index points,” said Mr Oster.
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