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Small business still struggling in tough conditions

A new survey has found that sales, profits, employment and investment in the small business sector all remain locked deep in negative territory.

According to the Australian Chamber of Commerce and Industry’s most recent small business survey, investment in plants and equipment has dropped to its lowest level in five years. In addition, investment in buildings and structures is also on the slide.

While most indicators in the survey showed some improvements in the March quarter, these were offset by significant deteriorations in other fields.

Overall, small business conditions remained well entrenched in negative territory despite a small increase in the index from a reading of 43.8 to 45.5 points. Sales revenue also experienced a rise, climbing from 43.4 to 45.1 points on the index but still falling well short of the neutral 50 point threshold.

Small business’ sales revenue has now languished in contractionary territory for the longest period on record since ACCI’s small business survey began more than 17 years ago.

The index for small business profits dropped from its already extremely low level of 36.0 to 35.9 points with the index having remained in negative territory since mid 2007.

The non-wage labour costs index also surged, rising from 61.7 to 65.0 points to eclipse a peak of 60.3 points in the December quarter of last year. In addition, small business employment continued to sink with the small business employment index falling from 44.8 to 44.1 points. Investment in plants and equipment fell from 43.6 to 42.8 – its lowest level in five years.

ACCI chief economist Burchell Wilson said that elevated wages growth and surging non-wage labour costs were squeezing profits and the small business sector was “clearly struggling as a result”

“For an increasing number of small businesses, growing their operations is simply not on the radar,” he said.

Delivering more positive news was the Commonwealth Bank’s Business Sales Indicator for April. It showed that spending had grown for 21 straight months – the longest period of sustained growth since the dark days of the global financial crisis.

Businesses in NSW have more to cheer about with the state overtaking Queensland to lead in terms of trend sales growth of 0.7 per cent. While 11 out of 19 industry sectors experienced a rise in sales, some sectors — including transportation, automobile and clothing — experienced a decline.

Joe Kelly
Joe Kelly is a writer for Dynamic Business. He has previously worked in the Canberra Press Gallery and has a keen interest in business, the economy and federal policy. He also follows international relations and likes to read history.