The survey found that SME business conditions edged down in Q3, led by softening conditions for the smallest firms; however, conditions remain strong among medium-sized and larger SMEs, and overall SME confidence edged higher in Q3.
Businesses involved in transport, accommodation & food, finance, and wholesale all reported strong conditions, while conditions remained fairly robust across the states. Forward orders edged down but capacity utilisation reached a record high of 84.9 per cent while cost pressures and price growth remain elevated and reported margins continued to deteriorate — though at a slower rate.
NAB chief economist Alan Oster said conditions fell the most among the smallest firms, where they are now at just +4 index points.
“Strong demand has kept conditions very elevated for larger firms and the SME survey shows that has also been the case for medium-sized and larger SMEs with conditions remaining well above average for these firms,” he said.
“Only the smallest firms are lagging, with conditions held down by softer employment in particular. At the same time, confidence was highest for the smallest SMEs so they appear to be seeing better times ahead.
“Clearly, with a very tight labour market and very strong demand, even the smallest firms are operating close to their limits.”
Purchase cost growth remained at 2.4 per cent with 56 per cent of SMEs reporting the availability of materials as a constraint (down from 60 per cent). Labour cost growth edged up, to 1.9 per cent, and labour remains a constraint for 80 per cent of firms.
“Materials continue to be in short supply for many firms and costs continued to escalate in Q3,” said Mr Oster.
“Like larger firms, smaller firms also seem to be able to pass on some of the higher costs to consumers by raising prices for now, contributing to strong inflation. Notably, the sales margin index for SMEs improved in Q3 albeit it remains in negative territory.”
