Business confidence and conditions for Australian small to medium sized enterprises (SMEs) improved modestly over the past year, adding to evidence that domestic activity levels are holding up despite growing concerns emanating from offshore.
The table below, supplied by the NAB, reveals the internal movements of its SME business survey released earlier today.
While in overall terms both business confidence and conditions improved from 12 months earlier, it’s clear that larger firms enjoyed significantly stronger operating conditions, hence overall confidence, than their smaller peers.
As it clearly shows, measures for cash flow, trading conditions, profitability and employment for smaller firms – those with an annual turnover of between $2-3 million – were significantly weaker than for larger firms.
“While business conditions for SMEs have been more subdued than for the broader business community, conditions were reassuringly stable through 2015,” said Alan Oster, chief economist at the NAB. “Trading conditions have been particularly strong, while employment has been somewhat disappointing.”
Mirroring the performance in the broader NAB monthly business survey, services firms, with the exception of retailers, outperformed other sectors within the economy.
“Conditions are particularly positive for small businesses in the finance, property, hospitality and health sectors,” said Oster. “In contrast, conditions have turned negative for those in wholesale and retail.
“This bears close watching and could suggest that smaller firms in the retail and wholesale sectors may not be as well positioned as larger businesses to absorb higher import costs associated with the lower currency.”
Like the performance by sector, there was also a vast disparity in operating conditions and confidence across the nation, with non-mining states outperforming those closely tied to the mining sector by some margin.
“The widening disparity in SME business conditions between the best-performing and worst-performing states suggests that the rebalancing of growth away from mining states to non-mining states is gaining traction,” said Oster. “On a state by state basis, NSW and Victoria remain the most resilient in terms of business conditions, while conditions in WA and SA remain negative.”
Combined, Oster suggests that the disparity seen between sectors and location “suggests that the rebalancing of growth away from mining states to non-mining states is gaining traction”.
Looking ahead, the survey’s lead indicators for activity – forward orders and capacity utilisation – both deteriorated modestly, suggesting that the gradual recovery seen in 2015 will likely remain just that – tentative – in the year ahead.
“Weaker but still positive forward orders still point to a tentative recovery in small business activity into 2016″, said Oster. “Measures of capital expenditure however have not picked up further, which suggests non-mining investment may continue to disappoint.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.