July 30, 2015
NAB Quarterly SME Survey – June Quarter 2015
In the June quarter, SME quarterly business conditions and confidence rose rising by 2 points to +4 and +5 index points respectively. SME business conditions were superior in property, finance, business services, wholesale, manufacturing and transport sectors.
Key Points: SME business conditions and confidence lift
- In the June quarter, SME quarterly business conditions and confidence appeared to have benefited from the tax measures targeted at micro businesses in the Federal Budget, with the conditions and confidence indices rising by 2 points to +4 and +5 index points respectively.
- Within the sub-indicators of SME business conditions, trading conditions stood out to be the strongest, which flowed into better profitability conditions. However, SME firms’ continued reluctance to hire was reflected in the sustained lull in the employment conditions index, which lapsed into negative territory in the quarter.
- Analysis by the size of SME businesses suggests that firms have generally experienced better conditions and confidence in the quarter, with the exception of conditions for mid-tier firms, Despite a recent improvement, low-tier firms with an annual turnover of $2-3m continued to under-perform consistently across major indicators relative to their larger counterparts. In particular, these firms fared poorly in their cash flow conditions, with their cash flow index falling by 11 points to -17 index points.
- Conditions by industry continued to paint a mixed picture, with service-oriented industries maintaining momentum ahead of non-service industries in general. Property, business services and finance firms continued to do well, although conditions of property firms have moderated compared to last year. Conditions in manufacturing were largely unchanged around the neutral mark. Meanwhile, retail and construction (which includes residential, non- residential and mining-related construction) overtook wholesale and transport as the worst-performing industries in the quarter, with conditions in the latter two improving significantly, albeit still marginally negative.
- SMEs’ overall confidence improved slightly in the quarter to +5 to be at similar levels with that of general businesses’ as measured by the NAB Quarterly Business Survey (QBS). Most industries recorded an improvement in confidence in the quarter except for manufacturing and accommodations, cafes & restaurants. Property and construction firms were the most confident in the quarter, while finance experienced the weakest. Confidence by health SME firms rebounded sharply from -21 to around the neutral mark this quarter, but this could prove to be a blip in the data due to a small sample size.
- Conditions across states were mixed in the quarter, with NSW continuing to claim the top spot, while a 10-point surprise jump in the conditions for South Australia (to +6) propelled it to a tie second position with Victoria. Meanwhile, WA (-7) and Qld (-6) fared the worst in the quarter.
- Forward orders leapt into positive territory at +4 index point in the quarter, with the positive reading largely driven by high-tier SME firms. SMEs’ capacity utilisation (78.2%) diverged further away from that of general businesses’ (80.9%) , to decrease further below its long-term average of 79.8%.
For further details, please see the attached document.