According to the latest NAB Quarterly SME Survey for Q1 2024, small and medium-sized enterprises (SMEs) in Australia have experienced a further decline in business conditions, contrasting sharply with the stability observed in larger firms.
“Conditions for SMEs have fallen materially below average,” said NAB chief economist Alan Oster (pictured above). “This is quite different to what we have seen among larger firms in our other surveys, and suggests SMEs are feeling the slowing in the economy more directly.”
The survey highlighted a notable divergence between SMEs and larger corporations, with SMEs reporting negative business conditions and confidence levels.
While business confidence saw a slight improvement from the previous quarter, it remains in negative territory. The report details a two-point rise in business confidence to -6 index points and a slight increase in forward orders, up 3pts to -4 index points.
SMEs in the manufacturing, wholesale, and retail sectors continue to face significant challenges, continuing to report negative business conditions in trend terms, which according to Oster suggested that “the goods part of the economy where discretionary and bulky spending by consumers really matters is where the challenges are most acute.”
Cost pressures have slightly eased, with quarterly purchase cost growth decreasing to 1.4% and labour costs growth dropping to 1.1%. Despite these slight improvements, price growth remained steady at 0.9%, indicating ongoing challenges in passing costs onto consumers.
Investment trends among SMEs showed minor positive movement, with capital expenditure rising by one point to +5 index points. However, capacity utilisation among these firms has slightly decreased to 81.0%, down from 81.4%, reflecting the continued impact of economic pressures on SME operations.
The outlook for SMEs remains cautious, with persistent concerns about future economic conditions.
“SME confidence continues to be very negative, notwithstanding there was a bit of an improvement in Q1,” Oster said. “This has been a consistent story across SMEs and larger firms with the outlook for the economy remaining clouded and many firms concerned about the future.”
For more information, visit the NAB website to see the NAB Quarterly SME Survey report.
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