The National Australia Bank’s latest quarterly survey of confidence and conditions for small and medium businesses has shown a sharp improvement.
The rise echoes the big improvement reported last week in the NAB’s monthly survey of business confidence and conditions in October.
Yesterday the bank said the SME Quarterly Survey (for September 2009) showed that business conditions for SMEs have improved significantly, reaching positive territory for the first time since the Global Financial Crisis began in September 2008.
The bank said that for the September quarter, large SMEs with an annual turnover between $5m – $10m recorded the strongest improvement and were the best performing at 6 index points, up from -13. Small SMEs ($2 – $3M) recorded an improvement from -7 to 4 index points, with mid-sized SMEs ($3 – $5M) increasing from -6 to 3 index points.
(The NAB SME Enterprise Survey interviewed almost 700 firms with an annual turnover of $2-10 million per annum. The average number of employees is 31 (15 employees for $2-3 million turnover; 27 employees for $3-5 million turnover and 41 employees for $5-10 million turnover). References to ‘larger businesses and counterparts’ refer to businesses with over 35 employees.)
The main driver of sales this quarter has been a sharp improvement in customer confidence/demand, and represents the first positive outcome since September 2008. "Positive impacts from seasonal and competitive factors have also helped."
In the statement accompanying the report the NAB’s Group Executive of Business Banking, Joe Healy said that despite these positive survey results, businesses should remain cautiously optimistic about improving business conditions.
"Business confidence among SMEs for the September 2009 quarter improved significantly (by 22 index points) to a positive reading of 15 index points.
"While this is great news, we’re keen to see these positive signs continue well into 2010 before claiming we’re out of the woods," said Mr Healy.
- All states, except WA, recorded an improvement in conditions in the September quarter. Unlike last quarter, when all states recorded poor conditions, most states (ex Qld and WA) recorded positive conditions.
- Victoria and NSW were jointly the best performing states this quarter, followed closely by SA. All three states performed better than the national average.
- WA was the laggard, followed by Queensland. Both recorded poor conditions this quarter.
- With the exception of NSW and SA, SMEs generally underperformed their larger state counterparts.
"This underperformance was most apparent in WA and Queensland.
"SMEs in all states, excluding WA, saw some level of improvement. VIC surged 20 index points from -12 to 8.
"NSW increased sharply from -9 to 8 points, SA improved from -2 to a positive index of 6. Queensland improved significantly from -14 to a still poor, -1.
Western Australia went against the trend and had the poorest performance, worsening from -6 to -10.
"While business conditions around the country have overall improved, WA reported a decline in business conditions," the bank said in the statement.
"Although Queensland improved significantly, it fell short of moving into positive territory.
"We’re waiting to see if the holiday season will have a positive effect on these states and expect to have a better idea as to how their recovery is travelling as we head into 2010," Mr Healy said..
"Health, wholesaling and finance were the best performing SME sectors, while conditions were weak and poor in transport, retail and most parts of construction and manufacturing.
- Health, followed by wholesaling and finance were the best performing SME sectors. Finance continues to benefit from an improvement in equities.
- In terms of quarterly movements, there were sharp improvements in manufacturing, construction, health and wholesaling. Transport was the only sector to deteriorate this quarter.
- SMEs performed better than their larger counterparts in business services, and manufacturing. However, they underperformed in retail, finance and transport.
- SME conditions were weak and poor in transport, retail (mainly food and motor vehicle), and most parts of construction and manufacturing.
"SME profit growth for the September quarter improved strongly, up 15 index points to positive 3 for the September quarter. Moreover, the annual profitability outlook surged again this quarter, up a further 26 index points to 27 index points, coming from record lows.
"All categories of SMEs are optimistic about the annual outlook with the middle size ($3-5m) segment the most optimistic.
"In terms of sectors, finance and health were optimistic across all segments."
The NAB survey said the most optimistic sector overall (SMEs & large) was small transport operators.
Other SME sectors which were very optimistic include health, wholesale, finance, business services and property services, while retailers were the least optimistic among the SMEs.
"For most sectors, SMEs and their larger counterparts have a broadly similar view of near term confidence with the exception of Construction, wholesale, transport and property services SMEs were more confident. In retail and accommodation SMEs were less confident," the survey added.
