Business sentiment among small-to-medium sized companies (SMEs) has surged to a high in recent months, heralding a mood not seen since the onset of the global economic crisis, according to the recently released Sensis business index.
The survey found business confidence jumped 20 percentage points in the September quarter, with optimists outnumbering pessimists 65 per cent to 15 per cent. This was the largest quarterly leap since the survey began in 1993 and followed an 18 percentage point increase the previous quarter.
“The key reasons SMEs gave for improved confidence this quarter related to feeling that business and the economy would improve,” the report said. “This quarter’s strong improvement brought confidence to its highest level since August 2007, before economic conditions started to decline.”
Boosted confidence was also reflected in an improved outlook for the year ahead, with more companies anticipating higher sales and profitability over the next 12 months than in the previous quarter. Business confidence was highest in Tasmania and the Northern Territory and lowest in New South Wales.
Despite the improved outlook, the report found trading conditions remained tough in the three months from May to July however. Businesses continued to shed staff, and at a faster rate than the previous quarter. Most of those surveyed also reported lower profits, while the number of respondents who said their sales rose was equal to the number who saw sales fall. Exports also decreased.
Key changes SMEs were making as a result of the economic downturn included cost reductions, increased advertising, and expanded product ranges, the report said.
It also hinted that despite two strong quarters of improvement, the current economic downturn continued to have an impact on business. Boosts to confidence and expectations had been stronger than improvements in actual performance, meaning risks to the sustainability of the current economic recovery remained.