Small firms confidence sinks in June quarter

Business confidence among small firms fell to a nine-year low in the June quarter, according to ANZ’s quarterly Business Micro Scope survey.

A net 30% of small businesses are pessimistic about general business conditions, the most since March 2009. Confidence slipped in both micro firms (0-5 employees) and intermediate-sized businesses (those that employ 6-20 employees), unwinding gains in confidence reported in March.

“Regulation remains the biggest concern facing small firms, particularly those in agriculture,” said Antonia Watson, ANZ’s Managing Director Retail and Business Banking.

“Difficulty finding skilled employees is an ongoing challenge for many small businesses, particularly in construction, manufacturing, services and retail, and it continues to weigh on their confidence. External factors are also impacting confidence levels, including a cooling housing market and intense online and offshore competition for our retailers.”

The ANZ composite growth measure for small firms a key proxy for GDP growth fell across all sectors, with agriculture and construction reaching negative territory. While sentiment remains pessimistic, the results suggest small firms are still experiencing sustained demand for their goods and services, however, potentially at a decelerated pace.

Hiring intentions fell to 4%, slipping away from a short-lived recovery seen in March and affected by drops in the construction and agricultural sectors.

Profit expectations fell deeper, affected by the construction sector dropping 54% points to -14%, which is likely reflecting rising construction costs and labour shortages.