The latest edition of the SME Sentiment Tracker, prepared by business market research firm Fifth Quadrant in partnership with Ovation, still paints a bleak picture for SMEs in terms of revenue, with 39 per cent reporting declines in August and only 21 per cent seeing growth, marking the weakest performance in 12 months.
Optimistic, but longstanding concerns linger
Despite the ongoing challenges, the research also pointed out that many businesses have shown resilience by managing costs effectively, with only 17 per cent reporting losses, down from 29 per cent a year ago. In addition, fewer businesses are facing severe financial difficulties, dropping from 30 per cent in June to 25 per cent in August, reflecting improved cost management in a competitive market.
The tracker also highlighted a decline in inflation. However, concerns about operational and production costs have increased slightly as customers have become more price-sensitive. Because of this, there is a marked decline among SMEs opting to pass on higher input costs to consumers as they focus instead on reviewing supplier contracts and reassessing major projects.
Staffing remains a challenge as well, with only eight per cent of SMEs planning to increase staffing in the next three months, the lowest level in a year. As a result, recruitment activity remains stagnant, with just 15 per cent of businesses trying to fill positions.
Meanwhile, confidence in the global economy continues to decline, with 58 per cent of businesses expecting further weakening over the next three months. On the other hand, sentiment around the Australian economy is more optimistic, though it remains lower than earlier in the year.
Holiday preparations
As the pre-Christmas trading period draws near, the report noted that SMEs are planning to increase marketing spend, with 22 per cent signalling heightened activity. However, business investment across most equipment categories has steadily declined throughout 2024, resulting in weaker demand for financing, as businesses adopt a cautious approach in navigating the ongoing economic uncertainty.
Fifth Quadrant, Managing Director, James Organ said: “In summary, sentiment has declined across all key indicators, but SMEs have implemented initiatives to reduce costs and future-proof their businesses. Recruitment and capital investment activity remain very low, but there is a positive outlook for an uplift in marketing activity as the pre-Christmas period approaches. This reflects a cautious yet proactive approach as businesses prepare for a critical trading period.”
