Below trend growth to continue
The impact on SMEs
Business conditions in the NAB Monthly Business Survey eased in April but are still well above average. Elevated trading conditions continue to suggest demand is strong and the employment index also ticked higher in the month, reflecting the strength of the labour market. However, cost growth remained a challenge, with purchase cost growth picking back up after easing in recent months and labour cost growth still high. Nonetheless, price growth measures continued to gradually moderate with overall price growth running at 1.1% in quarterly terms and retail prices at 1.4% (down from 1.7%). This may signal further gradual easing in inflation in the early part of Q2 after the most recent CPI release showed some easing in Q1, albeit inflation remains very elevated.
Against this background, there was a further easing in supply chain issues for SMEs in Q1 2023. In total, just 15% said it was very significant in the last 3 months, down from (20%) in Q4’22 and a high of 31% in Q2’22. Just over 1 in 10 (12%) SMEs now believe supply chain will be a significant issue for their business in the next 12 months, down from almost 2 in 10 (18%) in the previous quarter and 3 in 10 in Q2’22.
The number of SMEs who reported a very significant supply chain impact in the last 3 months was lower in all states. However, the overall number of highly impacted SMEs in Q1 was twice as high in WA, QLD, and VIC (16%) than in TAS and SA (8%). Fewer SMEs in all states also think supply chain will be a very significant issue for their business in the next 12 months. However, this ranged from 15% in VIC to just 6% in SA.
Fewer SMEs in all sectors reported a very significant supply chain impact in Q1, except Finance & Insurance (18% up from 6% in Q4’22) and Health Services (3% up from 0%). Highly impacted firms continue to be most prevalent in Wholesale Trade (22%), and least so in Health and Business Services (3%). The number of SMEs who think supply chain will be a significant issue in the next 12 months increased in Finance & Insurance (18% from 13%) and Accommodation & Hospitality (8% from 6%). It is highest in Transport & Storage (22%) and lowest Business and Health Services (3%).
For more information, please see the full report SME Supply Chain Update (Q1 2023)
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