With economic conditions remaining weak, the latest Fifth Quadrant SME Sentiment Tracker reveals that 33 per cent of small businesses are reporting lower revenues than 12 months ago, with the Health and Education sector being the only exception.
The report also found that only 50 per cent of SMEs reported making a profit, a decrease from 59 per cent in April. Furthermore, more than one-fifth of SMEs reported losses, which the report notes as an indicator of their vulnerability.
Growth expectations for the next 12 months have decreased as well for the fourth consecutive month, which the report interprets as an indication that stronger economic conditions are not anticipated soon. Similarly, revenue expectations for the next four weeks are low, mirroring the levels reported in May 2023.
Despite these challenges, there has been a slight easing of inflationary pressures, as concerns about key inputs, including energy and fuel costs, have declined.
Employment data indicates a downward trend, with only nine per cent of businesses planning to increase staff in the next three months and an equal percentage expecting a decrease. And despite being seen by some sectors as a positive development, the upcoming rise in the minimum wage in July is seen to put upward pressure on payroll costs which may lead to a rise in unemployment. Consequently, recruitment activity remains low, at 17 per cent.
Despite these ongoing challenges, there are signs of improving business sentiment towards the global economy. The percentage of businesses expecting stronger conditions has risen to 14 per cent in May 2024, and the net sentiment score has improved from -45 per cent to -31 per cent, reflecting growing optimism about economic prospects in the global economy.
“In summary, revenue, profit and employment data are all on the decline with little expectation that the economic conditions in Australia will improve any time soon,” Fifth Quadrant Managing Director, James Organ, said. “The data indicates unemployment will rise again next month and hence the ongoing commentary regarding the direction of interest rates will again point lower. Hopefully, this will stimulate greater consumer confidence and spending activity.”
