SME confidence reaches 5-year high

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The latest Sensis Business Index reveals SME confidence is at the highest level in almost five-and-a-half years.

The quarterly survey of more than 1000 SMEs across Australia found SME confidence increased by nine points to +44, which is the highest level since March 2011.

In the June Index, three states posted confidence levels higher than the national average, led by New South Wales (+58), the ACT (+49) and Victoria (+46).

Confidence levels also increased in Queensland (up six points to +36), South Australia (up 24 points to +29) and Western Australia (up nine points to +20).

However, SMEs in Northern Territory and Tasmania are feeling less confident – down four points to +23 and down 17 points to +30 respectively.

According to the survey, of the 60% of SMEs that feel confident, the three main drivers are: being an established business, having specific business strengths and healthy, growing sales.

On the flipside, 16% of survey respondents feel worried because of decreasing sales and an unfavourable business, economic and industry environment.

In other key findings, SMEs’ assessment of the economy has improved – but remains negative on balance – with 24% believing the economy is slowing (down from 35% in the March quarter), while 16% consider it to be growing (up from 13%).

So which sectors are the most confident? The survey shows while sectors varied, all had a positive net balance.

Three sectors topped the table for confidence in the June quarter: Health and Community Services, Finance and Insurance, and Hospitality. Other sectors that displayed above average confidence were Communication, Property and Business Services and Cultural, Recreational and Personal Services, while confidence remained lowest in Retail Trade and Manufacturing.

A snapshot of other key findings from the survey include:

  • SME confidence is highest in metropolitan locations (up 13 points to +50) compared to regional locations (up four points to +35).
  • The majority of SMEs (59%) believe the economy will be the same a year from now, while 22% believe it will be worse and 19% better.
  • Almost half of SMEs (44%) say their business faces no significant problems.
  • The main concern for SMEs was lack of work or sales (down 6% to 14%) and finding or keeping staff (up 3% to 8%). Of those SMEs facing this challenge, finding the right type of staff was the most pressing problem, followed by lack of qualifications.
  • Other areas of concern for SMEs include competition (6%), cash flow, bad debts and profitability (6%) and the economic climate (5%).
  • In terms of sales in the March quarter, Hospitality was the strongest performer, followed by Cultural, Recreational and Personal services and Communications, Property and Business Services, however, Manufacturing and Transport and Storage recorded the lowest net balance.
  • Profitability performance continues to be negative, with the exception of the ACT (+14) and Tasmania (+7). Three sectors recorded positive net balances for profitability in the March quarter: Hospitality (+14), Cultural, Recreation and Personal services (+7), and Finance and Insurance (+2). Retail Trade (-26), Manufacturing (-24), Wholesale Trade (-19) and the Transport and Storage (-17) were the worst performers.

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