The latest Fifth Quadrant SME Sentiment Tracker reports continuing soft revenue in line with weak economic conditions.
Some 33% of respondents in May 2024 reported lower revenues than 12 months earlier.
Health and education is the only sector showing significant growth, while retailers are doing it tough, with 39% reporting lower revenues over the past three months.
Profitability remains volatile. Only 50% of SMEs reported making a profit in May, a decrease from 59% in April. More than one-fifth of SMEs reported losses, underscoring their vulnerability. Despite these challenges, there has been a slight easing of inflationary pressures, as concerns about key inputs, including energy and fuel costs, have declined.
Growth expectations for the next 12 months have decreased for the fourth consecutive month, suggesting 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.
Employment data indicates a downward trend, with only 9% of businesses planning to increase staff in the next three months, and an equal percentage expecting a decrease. The upcoming rise in the minimum wage in July is expected to put upward pressure on payroll costs, likely contributing to the increase in unemployment. Consequently, recruitment activity remains low, at 17%.
Despite these ongoing challenges, business sentiment towards the global economy is improved. The percentage of businesses expecting stronger conditions has risen to 14% in May 2024, and the net sentiment score has improved from -45% to -31%, 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 soon. The data indicates unemployment will rise again next month; hence, the ongoing commentary regarding the direction of interest rates will again point lower.
Please click on this link to access the full report , including subgroup analysis by industry sector, size of business and State. Fifth Quadrant and Ovation Research publish monthly updates of this research here.
