Small and medium businesses are losing confidence

Perceptions of the economy have plummeted, as business owners get very nervous about rising interest rates, the global economic environment and decreasing business, shows a new report.

The February Sensis Business Index, which tracks the expectations of 1800 owners of businesses with fewer than 200 employees over three months, found that more business owners feel that on balance the economy will be worse a year from now.

There was a significant fall (23 percentage points) in the proportion of business owners who felt the economy was currently growing. Coupled with this was an increase of 13 percentage points in the proportion of business owners who felt the economy was slowing.

“Current perceptions of the economy fell dramatically and perceptions about the future economic direction also plummeted,” the report says.

Perversely, SMEs experienced an improvement in their confidence about their own businesses following a dramatic decline last quarter.

The main reason given by the business owners who were more confident was that their business has been improving, they are feeling established and experienced in business and they have good levels of profitability.

The lowest level of business confidence was in NSW, with regional businesses reporting lower confidence levels than metropolitan counterparts.

Confidence was highest in the building and construction industry and lowest in retail, trade and cultural, recreational and personal services sector.

The survey, conducted from 21 January to 13 February, also found that finding and keeping staff remains the most pressing problem. The economic climate is now the second most pressing problem followed by lack of work/sales.

There was a significant decline in the proportion of business owners that reported increased sales over the past quarter.

However increased proportions are expecting sales to improve. Profits also fell strongly, but again the business owners were expecting improvements.

The net proportion of business owners who increased their prices rose sharply during the last quarter, with more owners expecting to increase their prices in the short term.