Quarterly SME Survey – December 2011

The NAB Quarterly SME Survey covers conditions in small, medium and emerging businesses (SMEs) across all parts of the non-farm business sector in Australia.

SME confidence and conditions rebound but still below levels of their larger counterparts. Low tier (smallest) SMEs struggle.

• SME firms reported improved confidence in the December quarter – especially compared to the weak September quarter reading. However, overall confidence levels remain soft and a touch below levels reported by larger businesses in the NAB Quarterly Business Survey. It appears that firms took some relief from the RBA’s two rate cuts late last year but global economic uncertainty remain the most important concern for SMEs. The improvement in confidence of SMEs was more pronounced than that of larger firms.

• SME business conditions improved solidly, although this is likely to have partly reflected favourable seasonality in the lead up to Christmas. There is insufficient data to seasonally adjust the SME data. That said SME conditions generally remain weaker than for larger firms – with the notable exception of manufacturing.
• By industry, confidence improved significantly in small transport, accommodation, cafes & restaurants and construction, while it weakened a little in retail, health and business services. Sentiment was weakest in wholesale and retail and strongest in accommodation, cafes & restaurants and construction. Confidence improved across most states but was generally fairly poor everywhere. NSW is now the least confident about near-term activity.
• Conditions improved across all industries in the December quarter, except for business services and health. Conditions improved significantly (but probably due to seasonality) in transport, property and retail. Conditions were strongest in finance, health and accommodation, cafes & restaurants, and weakest in wholesale, retail and construction. By state, conditions improved in WA Victoria and SA. That said Victoria was the only state to report positive conditions, while conditions were weakest in NSW and SA.
• Confidence levels strengthened across all firm sizes, with high-tier firms (turnover of $5-10m p.a.) now the least pessimistic SME segment. Conditions improved significantly for mid- ($3-5m p.a.) and high-tier firms, but were only slightly better (and subdued) for low-tier firms ($2-3m p.a.).
• Cash flows picked up solidly in the December quarter, with particularly solid improvements in accommodation, cafes & restaurants and transport. In contrast, cash flows of construction and business service industries weakened. Cash flows were strongest in Victoria, but deteriorated marginally in NSW (to the weakest levels).
• Employers’ long-term decisions are most constrained by global economic uncertainty (now the number one concern) and a lack of demand. Interest rates became less of a concern in the December quarter and, surprisingly, concern about the currency remains low.

For further analysis download the full report.

• Quarterly SME Survey – December 2011 (PDF)