Small business sales up almost 5% as household stimulus kicks in

Small business sales rose by almost 5% year-on-year in July and by 3.8% over the year to the three months to July, with assistance for households as part of the carbon tax package a main driver, according to a new report

ANZ’s Small Business Sales Trends report for July shows sales rose by 4.9% during the month.

Sales growth strengthened in NSW (up 4.2% year-on-year) and remained robust in the resources states of WA (up 6.5%) and the Northern Territory (up 6.3%).

Growth in sales was much softer in South Australia (up 2.7%), Victoria (up 2.3%) and Tasmania (up 1.6%), partly reflecting the adverse effects of the persistently high Australian dollar.

The recent trends in sales growth by type of business also continued in July.

Business services and food-related small businesses showed stronger sales figures than retailers selling clothing and fashion, homewares and furniture, and appliances and electrical.

According to Nick Reade, ANZ general manager of small business, NSW was a particular standout in the July report.

“Sales [in NSW were] up 4.2% year-on-year for the three months to July, and 5.7% for the month compared to July last year,” Reade said in the report.

“Anecdotally, we’re also hearing positive reports coming from our small business customers in NSW, which supports the solid growth in the sales data.”

“With this pickup in activity in NSW, along with solid growth improvements across the board… we’re hopeful that confidence is rebuilding in some areas, and may continue.”

According to ANZ senior economist Justin Fabo, it’s likely sales were boosted by the Federal Government’s $2.8 billion stimulus package to households over the six weeks to the end of June.

“Sales growth may also have been supported by lower interest rates since late 2011,” Fabo said in the report.

“For these reasons, it is still too early to tell whether the recent increase in small business sales growth will persist.”

Fabo reiterated the point that the divergence between trading conditions in the non-food retail sector and other industries persisted in July.

“In part, this reflects that retailers’ sales have been most affected by the persistently high Australian dollar, which has adversely affected margins for many businesses,” he said.

“The effect of the strong currency can also be seen in the divergent sales performance at the state level. Sales growth in Victoria, South Australia and Tasmania has been relatively weaker than in most other states.”

“The high Australian dollar is leading to relatively greater structural adjustments in these states’ economies, with Tasmania’s important tourism industry also adversely affected.”