NAB SME Business Survey: Quarter 4 2021

SME businesses shared in post-Delta rebound

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Overview

Small and medium enterprise business confidence surged in Q4 and conditions also rose as the economy reopened in the months following the Delta outbreak. SME confidence bounced back to a strong +15 index points – well above average – after falling below zero in Q3.

According to Alan Oster, NAB Group Chief Economist: “In line with the impact of lockdowns and reopening on larger businesses, confidence among SMEs surged in Q4 – particularly in the major eastern states where restrictions had previously been in place.”

SME business conditions also rose, from +8 index points to +11 index points, with conditions improving for SMEs in every state. Improvements in trading conditions and profitability drove the result, with the employment index edging down.

“SMEs were able to share in the rebound experienced by larger firms, and it was particularly pleasing to see that the smallest SMEs reported the largest improvement in conditions,” said Mr Oster. “Conditions returned to positive territory in NSW and Victoria, reflecting the resumption of activity in the major states as health-related restrictions were lifted.”

Confidence rose in all sectors other than health, while there were mixed results for conditions. Accommodation & food saw confidence rebound more than 50pts and conditions in the sector also improved but remained in negative territory at -16 index points. Construction, wholesale, retail, and property also saw conditions strengthen, while finance and transport saw conditions fall.

“Small businesses in the hospitality sector have been some of the hardest hit throughout the pandemic,” said Mr Oster. “SMEs in the hospitality sector reported an improvement in conditions in Q4 but were still in negative territory and we know that since then these same businesses will have faced further disruption from the Omicron outbreak. Still, the broader improvement in conditions among retail and construction SMEs was a positive sign.”

Leading indicators also rebounded in Q4. Capacity utilisation was back up to 82.1%, similar to the 83.3% recorded for larger businesses in the Quarterly Business Survey. Forward orders rose 14pts to +11 index points. Capital expenditure expectations for the next twelve months also strengthened, up 3pts to +8 index points.

The survey was conducted from 16 November to 13 December, largely prior to the onset of the Omicron outbreak.

According to Mr Oster, “The survey showed a clearly more positive outlook for SMEs in Q4. Since then, many businesses will have faced disruptions related to the Omicron outbreak, but the strength of the rebound leading into the end of the year will have put businesses in a stronger position to manage that disruption.”

“As the Omicron outbreak begins to ease, the survey results suggest SMEs will again be well positioned to take advantage of a rebounding economy over the coming months,” said Mr Oster.

The NAB SME Survey is the leading survey of small and medium businesses in Australia and complements the comprehensive Quarterly NAB Business Survey (QBS) which covers larger businesses. The SME survey 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.

For more information, please see the NAB Quarterly SME Business Survey Q4 2021