SME confidence bounces back, conditions deteriorate

Qld leads fall in business conditions over the March quarter despite confidence returning to the nation's SMEs post-floods

May 3, 2011

Queensland has led a fall in business conditions over the March quarter despite confidence returning to the nation’s SMEs post-floods, according to NAB.

The Bank's
SME Quarterly Survey for the March quarter shows that while confidence levels are the highest since Q1 2009, business conditions have fallen to their lowest level in two years.

SMEs reported that borrowing costs, staffing, global economic uncertainty and cash flow were all less significant as constraints on long-term decision making in the March quarter, while demand was the only constraint to have risen in significance.

However, SME business conditions – including trading, profitability and employment – softened again in the quarter to reach their lowest level since June 2009.

NAB Business Executive General Manager Daryl Johnson says while there are signs of optimism it is still a challenging time for SMEs.

"During the March quarter, SME confidence levels were up from five to eight (index) points, with all SME industries returning to positive territory," Johnson says.

"This suggests they are more optimistic about future conditions and are looking forward to the post-flood recovery period," he says.

Despite this optimism, SME business conditions have remained on a gradual decline from the post-GFC peak in December 2009.

Johnson says conditions have been pushed down again by the recent floods that are estimated to have reduced national business revenues by 5 percent in January.

Confidence levels were positive across each state, with Western Australia (13) and Victoria (10) recording the highest levels for the second consecutive quarter.

Meanwhile, business conditions deteriorated across all major states, except South Australia (1), with Queensland recording the largest deterioration (0 to -20) and Victoria the strongest (8).

An industry breakdown shows conditions were strongest in business services and finance, while conditions were weakest in construction and retail.

According to NAB, cash flows are now by far the strongest in accommodation and are weakest in construction, retail and property.

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