Services sector drives small rise in October SME sales: ANZ

Small business sales grew a modest 2.8% year-on-year in October 2011, the third such increase in as many months, according to the ANZ Small Business Sales Trends report released this morning.

The report shows the services and trades sectors (4.2% year on year growth) continued to outperform retailers (0.6% year-on-year growth).

Regional and rural businesses saw 4.7% year-on-year growth in October sales, while metropolitan businesses lagged with only 1.8% growth.

The figures favour large states, with all mainland states recording positive growth. The ACT, Tasmania and the Northern Territory all saw small business sales shrink in October.

ANZ small business manager Nick Reade says the results were encouraging.

“It’s no secret that for awhile now small businesses have been doing it tough,” he says.

Despite the continuing difficulties for retailers, Reade says he was hopeful the overall outlook for small business was improving.

“Overall consumer optimism is creeping back, particularly following the RBA interest rate cut earlier this month,” he says.

“We’re hopeful that despite the recent mood of consumer caution, consumer spending will make a comeback, particularly as shoppers gear up for the Christmas trading period.”

ANZ economist Ivan Colhoun says that while the last three months had seen positive momentum, the 1.9% total yearly sales growth lagged behind a headline inflation rate of 3.5%, implying real (inflation-adjusted) sales growth was still weak.

Colhoun singled out Queensland’s 5.2% year-on-year growth in October as a welcomed trend for the state.

“[It] has been slow to recover from the devastating effects of last summer’s floods and cyclone Yasi,” he says.

“We know that Queensland’s tourism activity remains soft, but clearly some other types of small businesses are beginning to improve again in Queensland.”

On monetary policy, Colhoun says ANZ supported another RBA rate cut.

“The prospect of another cut of 25 bps (0.25%) in the next few months many encourage more confidence in our domestic economic outlook and more confidence in consumer spending,” he says.

The ANZ Small Business Sales Trends report data is based on the value of credit, debit and Eftpos transactions processed through ANZ merchant terminals and all ANZ card transactions processed through other systems for businesses at least two years old, with an annual turnover of less than $5 million. ANZ has approximately 20% market share of all card transactions.