October 27, 2022

NAB SME Business Survey: Quarter 3 2022

Easing conditions for small firms, despite strong demand


SME business conditions edged down in Q3, led by softening conditions for the smallest firms. Still, conditions remain strong among medium-sized and larger SMEs, in line with the strength in demand reported by larger businesses in the NAB Quarterly Business Survey. SME confidence edged higher in Q3 and unusually, the smallest firms reported the strongest confidence. SMEs in transport, accommodation & food, finance, and wholesale all reported strong conditions, while conditions remained fairly robust across the states. Forward orders edged down but capacity utilisation reached a record high of 84.9%, mirroring the record set in the Quarterly Business Survey of larger firms. Cost pressures and price growth remain elevated, and reported margins continued to deteriorate – though at a slower rate.

Comments from NAB Chief Economist Alan Oster

SME business conditions fell in Q3, down 4pts, but remained well above average at +13 index points. Conditions fell the most among the smallest firms, where conditions are now at just +4 index points (albeit still around the long-run average). Conditions held up better among medium-sized and larger SMEs at strong levels.

“Strong demand has kept conditions very elevated for larger firms and the SME survey shows that has also been the case for medium-sized and larger SMEs with conditions remaining well above average for these firms,” said NAB Chief Economist Alan Oster. “SME confidence was also higher in Q3.”

“Only the smallest firms are lagging, with conditions held down by softer employment in particular,” said Mr Oster. “At the same time, confidence was highest for the smallest SMEs so they appear to be seeing better times ahead.”

“SMEs in transport, hospitality, finance, and wholesale are all reporting particularly strong business conditions,” said Mr Oster. “Conditions are still soft for SMEs in health and manufacturing. Importantly, SME conditions and confidence are holding up across the states.”

Leading indicators were mixed in Q3, with forward orders down 4pts to +9 index points, but capacity utilisation rose to a survey record of 84.9%, mirroring the record set in the Quarterly Business Survey of larger firms.

“Across all our surveys, firms are reporting capacity utilisation at record levels and SMEs are no exception,” said Mr Oster. “Clearly, with a very tight labour market and very strong demand, even the smallest firms are operating close to their limits.”

Purchase cost growth remained at 2.4% with 56% of SMEs reporting availability of materials as a constraint (down from 60%). Labour cost growth edged up, to 1.9%, and labour remains a constraint for 80% of firms. Final prices grew at 1.7% overall and the sales margin index rose 3pts, to -7 index points.

“Materials continue to be in short supply for many firms and costs continued to escalate in Q3,” said Mr Oster. “Like larger firms, smaller firms also seem to be able to pass on some of the higher costs to consumers by raising prices for now, contributing to strong inflation. Notably, the sales margin index for SMEs improved in Q3 albeit it remains in negative territory.”

For more information, please see the NAB Quarterly SME Business Survey (September 2022)

Ana Marinkovic – Making the most of holiday trading

Ana Marinkovic – Making the most of holiday trading

29 November 2023

The holiday season shopping flurry can offer some small businesses the opportunity to prosper… and others a time to take stock for the new year. Both call for careful preparation – particularly in the current environment. NAB Executive Small Business Ana Marinkovic shares her top tips.

Ana Marinkovic – Making the most of holiday trading