The May edition of the SME Sentiment Tracker reveals that 55 per cent of SMEs are reporting a profit despite slightly softer revenue compared to the previous month, alongside ongoing concerns about rising costs, primarily those related to interest rates (81 per cent of respondents), fuel costs (79 per cent) and energy costs (78 per cent).
A third, 33 per cent of SMEs, expect wage rises over the next three months due to reviews at the end of the financial year and the recently announced minimum wage rise.
Fewer SMEs, 65 per cent, were able to pass on increased input costs in May, which the report sees as an indication that customers are unwilling to pay more and competitors are dropping their prices. The report also reveals that 39 per cent of SMEs are fearful that they would not withstand the impact of a recession over the next 12 months. However, the proportion of growth-orientated businesses remains steady in May, with 35 per cent targeting growth over the next 12 months.
Despite these growth expectations, short-term revenue expectations continue to decline with only 23 per cent expecting revenues to increase over the next four weeks, compared to 32 per cent in March. However, sentiment regarding the Australian economy continues to rise albeit slowly, with 57 per cent expecting weaker conditions over the next three months, compared to 69 per cent reported in February.
Recruitment activity continues to slow down with only 18 per cent looking to fill roles compared to 26 per cent in March. Hospitality continues to be the most active, but most industry sectors are pulling back on their search for staff.
Satisfaction with the federal Labor Government continues to be flat, with 29 per cent of business decision-makers expressed satisfaction. The tracker has noted that this will decline further in June due to dissatisfaction with the minimum wage announcement. The Government is struggling to resonate with only 19 per cent of SMEs satisfied with the latest Federal Budget.
“In summary, SMEs continue to endure difficult conditions including ongoing cost pressures,” ACA Research Managing Director, James Organ, said. “Accordingly, sentiment remains weak and, therefore, recruitment activity is on hold for many. The RBA’s decision to again increase interest rates in June will be very difficult for SMEs to take, with nearly 40 per cent already reporting the impact of a recession could be difficult to withstand.”
The SME Sentiment Tracker is conducted by business market research firm ACA Research in partnership with Ovation and tracks business sentiment across more than 400 small and medium enterprises each month.
