April 29, 2013
Quarterly SME Survey – March 2013
SME confidence & conditions edge higher in March quarter but still near post-GFC lows; SMEs more pessimistic than larger firms and activity also more subdued. Capacity utilisation falls to lowest level in history, despite tick up in forward orders. Signs lower borrowing rates are helping…
SME confidence & conditions edge higher in March quarter but still near post-GFC lows; SMEs more pessimistic than larger firms and activity also more subdued. Capacity utilisation falls to lowest level in history, despite tick up in forward orders. Signs lower borrowing rates are helping interest rate sensitive sectors but offset by weakness elsewhere.
- SMEs business confidence improved only marginally in the March quarter and remained very poor relative to history and relative to levels reported by larger businesses in the NAB Quarterly Business Survey. SMEs appear less responsive to recent improvements in external factors, including equity price rises and easing European crisis concerns. SMEs are probably more affected by actual activity in their business, which remained subdued in early 2013.
- SME business conditions were slightly better in the March quarter, though remained very poor overall. However, changes in activity varied notably across industries. It appears that lower borrowing rates may have provided some support to interest rate sensitive sectors in early 2013 – property, finance services, construction and manufacturing – but this was broadly offset by weakness elsewhere. Business conditions weakened a touch in the mining states, a sign that the slowing in mining investment may be causing a widespread softening in activity in these regions, while they strengthened solidly in SA, albeit remained weak overall.
- Capacity utilisation slumped to the lowest level in the short history of the survey, despite an improvement in forward orders. Nonetheless, forward looking indicators remained subdued and still below weak levels reported by larger firms.
- By industry, confidence lifted strongly in finance and business services, likely in response to strong equity market performance and improved financial conditions, while it weakened considerably in property services, from a high level, and fell to depressed levels in retail. By state, confidence deteriorated modestly in the two largest mining states – WA and Queensland; while mining firms are not captured by the SME survey, the approaching peak in mining investment growth is likely to indirectly affect SME activity. Overall confidence was strongest in WA and by far the weakest in Queensland.
- The improvement in business confidence in the March quarter was entirely driven by high-tier SMEs ($5-10m p.a.), which were the least pessimistic of all SMEs; confidence of low-tier SMEs ($2-3m p.a.) was unchanged, while mid-tier SMEs ($3-5m p.a.) were marginally more pessimistic. Business conditions improved for low-tier SMEs and were unchanged elsewhere. Conditions were least subdued for high-tier SMEs and weakest for mid-tier SMEs.
- Responses to a special question suggest that two thirds of SMEs continued to improve or develop their websites in order to boost firms’ competitiveness over the past 12 months, while more than half of firms launched new products to try to strengthen their position among their competitors.
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