The most recent NAB Quarterly Small and Medium Enterprises Survey released 25 July 2019,
shows that business conditions are getting worse in Australia for smaller firms, especially
tradies.
Although business confidence is up (it rose by 3 index points), actual business conditions
have dropped to -4, continuing the downward trend over the past year.
At these levels, conditions are both below average and negative, suggesting that conditions
for small firms are now going backwards.
In this chart, we can see the current state of the three different sub-components of business
conditions.
Trading is down; Profitability is down; and Employment is down.
Employment and Profitability have both fallen to -6.
This chart shows us that business conditions have fallen for all firm sizes.
Larger businesses have fallen to 2; Medium to -7; with Small businesses being hardest
hit falling to an index score of -8.
Although confidence is up in every state of Australia, business conditions have fallen
everywhere with Victoria having the most favourable conditions.
WA is the worst hit, followed by NSW.
Although Victoria has the most positive conditions, taking a look at this chart, it’s nothing
to write home about.
Victorian business conditions have fallen dramatically over the last year from a peak
of about 26 in 2018 to 3 now.
Looking at business conditions by industry, we can see that Property and Retail are the
hardest hit sectors, both falling into severe negative territory.
Wholesale comes next, followed by Accommodation, Cafes, and Restaurants.
Regarding property, this chart says it all.
Property is down, down, down.
NAB Group Chief Economist Alan Oster described the results as “sobering”.
He said,
“The things that worry us are, one, business conditions have come down a lot, and two,
it is particularly the small end of town that has come down a lot — and that makes us
nervous.
It's the tradies, and they tend to lead the economy — and that's not a good sign.”
Sydney electrician Ray Sherriff, spoke to the ABC about business conditions in the building
sector earlier this year.
He said,
“Two years ago we literally didn't have time to price all the residential jobs that
were coming in.
Now it's rare and there are lots of jobs getting postponed and put back.
Maybe three to four years ago we were looking at probably 50 to 60% of our business.
Now we're probably looking at 20 to 30%.”
And most recently he said,
“Multi-unit domestic has really dried up.
The builders that are doing reasonable stuff has not dried up, but the run-of-the-mill
has crashed.”
The thing that I find most interesting, is that business confidence is up.
Have people lost their minds?
NAB’s Alan Oster commented,
“We don't think this higher confidence will persist with conditions so low and forward
indicators pulling back further.
Sales and trading continue to be the largest constraints on firm output — that is, demand
for their products is weak — and this is reflected in pressure on margins, with costs
growth continuing to outpace the growth of final product prices.
The employment index fell sharply and is quite negative.
This suggests that sluggish demand that has been evident for some time is now feeding
through to hiring decisions.”
Small business in Australia is clearly struggling — especially in the property and retail
sectors.
Trading is down.
Profitability is down.
Employment is down.
Bloody everything is down.