Small business profits plunge

Finance-iconFour new studies on business attitudes and confidence all agree - things aren't good out there. But the studies also differ in some regards, especially on whether or not the high Australian Dollar is bad news.

Four new studies on business confidence published in the last 24 hours all draw the same grim conclusion: things are tough out there and small business confidence is tumbling as a result.

The Sensis Business Index is one of the four studies and the quarterly study of 1800 businesses, conducted by Telstra’s directories arm, has hit record lows for business sentiment.

“Half of small businesses experienced a decrease in profitability during the quarter, while just two in 10 experienced an increase,” author Ms Christena Singh Index said in a press release.

Most small business also expect further profit falls in the next twelve months.

Singh said the Index’s current confidence indicators are the weakest in the quarterly study’s 18-year history.

A few other data points from the report include:

  • Business confidence fell from 28 to 15 per cent, the third lowest result in the report’s history;
  • Perceptions about the current state of the economy fell from negative seven per cent to negative 35 per cent;
  • The sales indicator fell strongly, down eight percentage points to negative 22 per cent;
  • Overall employment by small businesses fell one percentage point during the quarter;
  • Support for the Federal Government’s policies fell seven percentage points during the quarter, taking the indicator to negative 48 per cent
  • Key reasons small businesses gave for not supporting the Federal Government’s policies include the proposed carbon tax, a view policies were affecting consumer confidence, no incentives for small businesses and too much bureaucracy.

D&B says sales expectations slump

Another study, Dun & Bradstreet’s Business Expectations Survey, saw CEO Christine Christian say “We are beginning to see companies, particularly in manufacturing and retail, increasingly behaving like businesses in recession.”

A fear of interest rate rises is the main reason for their fears, Christian said.

“We are seeing that interest rate concerns are making businesses less inclined to grow their activities through new lines of credit or finance. This will have a knock on effect to sales and employment with companies more likely to resort to cost cutting measures.”

One area in which the D&B study differs from Sensis’ is its prediction that “Profit expectations appear to have bottomed out,” after a plunge in recent months.

One bright spot is the Survey’s finding that “37 percent of businesses see that a continuing strong Australian dollar will have a positive impact on their business in the quarter ahead – for 19 percent a significant impact.” That compares to a quarter of businesses who say a high dollar to have a negative impact.

Confusing currency

Bankwest’s Business Challenges Survey offers a different perspective on the Dollar, saying “over a third (35%) of businesses view the strength of the Australian Dollar as a challenge for their business, whilst a fifth (20%) of SMEs see it as an opportunity.”

The Bankwest Survey also offers another nugget of data that perhaps seems odd given the prevailing gloom, asserting that Businesses are also finding it tougher to retain employees (38%) and attract new talent (42%) compared to this time last year.

Overall, however, Bankwest’s sample feels things are tough, as illustrated by these tables summarising business attitudes.

Do you think there are more challenges facing your business than 12 months ago?

 

Yes

No

Don’t know

NSW*

86%

13%

1%

VIC*

77%

22%

1%

SA*

84%

15%

1%

QLD

82%

18%

0%

WA

72%

27%

1%

Australia

80%

19%

1%

Do you think there are more opportunities for your business than 12 months ago?

 

Yes

No

Don’t know

NSW*

39%

59%

2%

VIC*

41%

54%

4%

SA*

43%

54%

3%

QLD

34%

64%

2%

WA

47%

49%

4%

Australia

41%

56%

3%

*The following states have been grouped together in the tables- NSW & ACT, Vic & Tas, SA & NT

Farms also in a fug

The rural sector is also less-than-happy at present, according to the quarterly Rabobank Rural Confidence Survey.

In a press release issued yesterday the bank said “35 per cent of farmers expected conditions to worsen in the coming year, a significant increase from the 12 per cent with that view in the previous quarter. Only 18 per cent of farmers expected the agricultural economy to improve (down from 42 per cent previously), while 42 per cent expected conditions to stay the same.”

The fall in confidence has little to do with conditions on the land, as rain has been adequate and most farmers expect a decent or better harvest.

Rabobank’s General Manager for Rural Australia, Peter Knoblanche, said factors beyond farmers’ control are the reason for the unease.

“Inside the farm-gate, from a production point of view, things are shaping up for an overall good season,” Knoblanche said. “That said, farmers are not only affected by what is happening in their paddocks, but also what’s happening in the local and international economy.”

“The survey highlighted farmer concerns and uncertainty around issues including the proposed carbon tax, the suspension of live cattle exports to Indonesia and the impact of coal seam gas exploration and mining on agriculture,” Knoblanche added. “Threat to live export was also top of mind for farmers, particularly cattle and sheep farmers at the time of the survey – however the two private member bills to ban live export have since failed to win support from the government or opposition.”

Most of the farmers surveyed, (52 per cent) viewed coal seam gas exploration as a threat to agriculture

Of those farmers surveyed who expected conditions to improve over the next 12 months, 52 per cent cited rising commodity prices as the major driver and 46 per cent nominated favourable seasonal conditions.

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