Small business confidence back at boom time levels
December 4, 2009
Australian business confidence has returned to the high levels enjoyed prior to the economic downturn, according to the Sensis Business Index released this week.
The quarterly survey began in 1993 and provides the latest snapshot of small and medium enterprise (up to 199 employees) business activity in Australia.
Report author Ms Christena Singh said there had been another quarter of growth in business confidence, albeit at a slower rate than the previous two quarters.
“Following two very strong quarters of growth, business confidence has risen more moderately this quarter,” she advised. “Overall, this equates to a strong turnaround from the record low level of business confidence we saw in February this year.”
“Business confidence is now at the highest level in Australia since August 2007.”
The building and construction; communication, property and business services; and transport and storage sectors are particularly bullish about their business prospects over the next 12 months. However, confidence remains low in the manufacturing sector.
Business confidence has improved in all states and territories, with the exception of the Australian Capital Territory which recorded a fall and South Australia, where it remains stable.
In line with improved business confidence, perceptions of the current state of the Australian economy improved and are now at the highest level since November 2007.
“Importantly, both small business sentiment and actual business performance improved this quarter,” Ms Singh said. “In the early phase of the economic recovery, we saw business optimism streak ahead, while trading conditions remained at historically low levels.”
“This quarter we have seen business’ perceptions and their actual performance moving more in sync.”
Trading conditions have been strongest for the finance and insurance sector, with the highest sales and profitability results for the second successive quarter. The retail trade sector has experienced the weakest trading conditions.
Demand for goods and services strengthened further during the quarter, with the sales indicator hitting its first positive reading since February 2008.
Profitability improved again this quarter to be at the highest level since February 2008. Ms Singh noted that while the profitability indicator overall was still in negative territory, it was significantly higher than this time last year.
The finance and insurance sector experienced the strongest profitability, while the weakest profitability was experienced in the retail trade sector.
After a strong result last quarter, capital expenditure was the only performance indicator to fall (down from +3 to -9).
However, Ms Singh cautioned that, despite the positive results for the quarter, small businesses did not expect the coming quarter to be as strong.
“Small businesses overall are expecting demand and profits to be down on the previous quarter, but remain well above the low levels experienced during the economic downturn.”
The accommodation, café and restaurant sector is expecting the weakest conditions, while retailers are expecting the registers to ring strongly over the key Christmas trading season.