Small business holding their own in the face of economic gloom

There was some softening in the SME business conditions in Q4, though according to the survey, they held steady for the smallest firms with medium and larger-tier businesses seeing a softening in conditions.

Despite this, small-business confidence fell into negative territory, consistent with the fall in confidence among larger firms.

Forward orders declined and capacity utilisation also softened after record highs reported in the middle of the year. Cost pressures and price growth remain elevated, though the rate of growth in both costs and prices eased from Q3.

Overall, the survey suggests that growth is slowing but still healthy across the sector, but SMEs are increasingly wary of how long this will persist.

NAB chief economist Alan Oster said conditions eased somewhat across the board in late 2022 and that was true for SMEs.

“Still, conditions were above average showing that the economy remained resilient through the end of the year despite headwinds,” he said.

“The smallest firms continued to report the softest conditions in the survey but saw no deterioration between Q3 and Q4, with the easing concentrated among mid-sized SMEs.

“SMEs conditions turned negative in the property sector but otherwise remained positive.”

Across the states, SME conditions were strongest in Western Australia, Queensland, and South Australia but remained robust in Victoria and NSW.

“Confidence fell in Q4 across our surveys, with concerns about the global economy, rate rises and high inflation weighing on the outlook,” said Mr Oster. “SMEs displayed the same falling confidence, which was evident across all industries and states.

“Supply chain issues and labour shortages remained a pressing concern for SMEs in Q4. Like larger firms, there was some evidence that cost pressures were easing late in the year but price growth remained very elevated.”