Small and medium business (SMB) confidence has risen to a five-year high, largely due to an improved economic outlook, according to the latest Sensis Business Index survey.
The views of 1,000 SMBS were captured by the Index, which is released by Sensis each quarter. The latest survey found that 60% of SMBS are confident while 16% are worried. The net balance score of +44, being the difference between the percentage of confident and worried businesses, is the highest business confidence score recorded by Sensis since March 2011.
“While sales and employment improved and prices remain positive, wages and profitability went backwards this quarter,” said Sensis CEO, John Allan.
“These are not the results you would expect to see when confidence has lifted to a five year high. Rather than being driven by these indicators, confidence is instead being driven by perceptions that the overall economic environment is improving. On top of this, the non-cyclical influences remain strong, with businesses continuing to feel particularly positive about their own specific business strengths.”
Economic outlook improves (but still negative)
While SMB perceptions of the economy remained negative at -8, this was a 14-point improvement on the previous quarter as well as a two-year high.
“Concern about the economic environment has halved, with only one in twenty businesses now worried,” Allan said.
“Meanwhile, the number of businesses reporting a lack of work or sales as a barrier to taking on new staff fell from 51% to 38%– the lowest level we’ve seen since September 2014.”
WA is the least confident state
In terms of the individual states and territories, there were confidence gains among SMBs everywhere except for Tasmania and the Northern Territory. New South Wales extended its lead, while Tasmania – the most confident state two surveys ago – experienced the biggest fall, down 17 points.
Western Australia is now the least confident state. South Australia is finally off the bottom, following a 24-point rise in confidence. Northern Territory sits between the two states as the second least confident jurisdiction.
Speaking with Dynamic Business, Libby Hay, Director of Corporate Affairs at Sensis, suggested the mining downturn in Western Australia together with defence contract awarded to South Australia earlier this year played a role in the two states switching places on the confidence scoreboard.
Increased confidence amongst metropolitan SMBs
At a local level, confidence rose by 13 points in metropolitan areas (+50) but only rose by four points in regional areas (+35), with the gap between the two widening from six to 15 points this quarter.
“Metropolitan businesses are feeling more confident on all of the key performance indicators and, with the exception of New South Wales, now also lead their regional counterparts in terms of business confidence in every state and territory,” said Allan.
There was a reversal in confidence in South Australia and Western Australia, with businesses in Adelaide (up 33 points) and Perth (up 23 points) now more confident than those in regional areas in those states.
Regional businesses in NSW were the most confident of any regional area in the nation (+58) and also slightly ahead of SMBs in Sydney (+56).
The sector results were mostly positive, with Health and Community Services; Hospitality; and Finance and Insurance now sharing top spot, each on +58.
“While most sectors are feeling confident, manufacturers saw weak sales and demand, while retailers continue to worry about business conditions. These two industries are the least confident and are reporting more challenges than the other sectors,” Allan said.
In terms of the perceptions of state and territory governments, only the NSW Government recorded positive rating, with all except for the NSW and NT Governments going backwards this quarter.