Quarterly SME Survey – December Quarter 2014
After reaching the highest levels since 2009 in the September quarter, SMEs’ quarterly business conditions fell in the December quarter for the first time since Q4 2013. Firms from all tiers: low/micro, mid and high, showed consistent declines in their overall business conditions.
- After reaching the highest levels since 2009 in the September quarter, SMEs’ quarterly business conditions fell in the December quarter for the first time since Q4 2013. Firms from all tiers: low/micro, mid and high, showed consistent declines in their overall business conditions and sub-components (trading, profitability and employment conditions) in the quarter, with the only exception being improved profitability in mid-tier SME firms. It is indeed notable that micro SME firms (with turnover of $2m to $3m) are decidedly more downbeat than their larger counterparts in the SME space.
- Conditions were mixed across industries in the quarter. Property services and finance firms are performing well, despite the latter’s weak confidence. The conditions level of SME construction firms mirrored the move in confidence to track significantly lower, but still maintained at a robust level of +8 to be outperforming their larger counterparts (QBS) at +7. Manufacturing and retail continued to experience the weakest conditions in the quarter, as consumers continue to sit on the sidelines and a depreciating AUD contribute to higher input costs.
- SME business confidence remained positive, but declined in each quarter over 2014 after peaking a year ago as a result of improved business sentiment post the Federal elections. In Q4 2014 SME saw further significant falls in confidence, while micro SME firms turned pessimistic, reflecting generally poorer underlying results in trading, employment and profitability conditions. Meanwhile, the confidence levels of mid-tier (especially) and top-tier SME firms also weakened but in net terms remained positive.
- Weakening confidence in SMEs were consistent with those in the broader economy – as witnessed by the NAB Quarterly Business Survey (QBS). Among different industries, property and transportation firms are the most confident, whereas retail, finance and health firms continued to be mired in negative territory – with the latter possibly reflecting the uncertainty around health policy changes announced by the Federal Government. Construction firms experienced the sharpest decline of 11 points to +2. Consumers’ discretionary spending and confidence also remain weak.
- Confidence and conditions results across states were generally lower in the quarter, the exception being South Australian SMEs which registered a second quarterly improvement in business conditions from a low base to -2. New South Wales emerged as the best performer in SME conditions in the quarter.
- Forward orders improved marginally but remain at subdued levels. Capacity utilisation eased with softer trading and employment conditions overall, but masking the divergence across differently-sized SME firms: capacity utilisation improved for high to mid-tier firms, but deteriorated further for micro firms.
For further details, please see the attached document.