SME business conditions and confidence still negative: NAB survey
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The news: Business confidence in small-to-medium enterprises (SMEs) improved during the fourth quarter but remained "firmly in negative territory", according to a quarterly survey by National Australia Bank.
The numbers: NAB said SME business confidence increased by 3 points to -11 index points, improving across all states, but remains well below the survey's average of +2 index points.
SME business conditions fell 1 point to -4 index points, led by a large decline in business services. Conditions for the smallest SMEs fell by 3 points to -5 index points, and larger SMEs saw conditions ease by 2 points.
Conditions remain weakest for mid-tier SMEs, even with a small improvement in Q4 — up 1 point to -7 index points.
By industry, SME conditions declined materially in business services (-18 points), followed by smaller declines in finance (-6 points), construction (-4 points), transport (-2 points) and retail (-1 point). Finance and business remain the strongest industries for SME conditions in level terms. Conditions are weakest in manufacturing, accommodation and retail.
Across the states, SME conditions fell everywhere with the largest decline in South Australia. SME conditions remain weakest in Victoria (-8 index points) and New South Wales (-7 index points).
The context: NAB said confidence and conditions were negative across all SME tiers and notably weaker than for larger firms captured in NAB's quarterly business survey.
Input cost pressures eased, especially for labour costs, while the pace of output price growth also eased.
Labour availability remains a significant constraint for around 30% of firms, while the share of firms reporting sales as a significant constraint eased slightly in Q4, which may reflect the pick-up in trading conditions at the end of 2024.
Improvements in business confidence was driven by large increases in accommodation, health, transport and manufacturing. However, SME confidence is negative across all industries except transport.
The source: NAB SME business survey
