Australian SME biz activity dips moderately as Q4 starts: Judo Bank

The seasonally-adjusted Judo Bank Australia SME business activity index slipped to 47.6 in October, down from the 50 neutral print in September.

A sharper downturn in manufacturing output was observed as overall demand conditions softened and business confidence fell to the second-lowest on record.

As a result, spare capacity further developed, which led to job shedding in October, albeit only marginally. Price pressures further eased as a reflection of softening demand.

Central to the latest downturn in SME activity was a decline in incoming new business, driven by a sharp fall in new work intakes at manufacturers.

Where lower new orders were reported within the manufacturing sector, firms highlighted the softening of economic conditions weighing on goods demand, said an S&P Global release.

Despite October’s downturn marking the fourth consecutive fall in new business among SMEs, the rate of contraction was only marginal and far slower than that among large enterprises.

As a result of the reduction in new work, the volume of backlogged work continued to deplete across Australian SMEs. This was more pronounced for goods producers.

The heightened development of spare capacity within the SME sector led to firms lowering employment levels in October. This was only the fourth time that job shedding occurred within the Australian SME sector in the past three years. The fall in headcounts was concentrated within the manufacturing sector.

Average input prices continued to rise in October amidst higher wages, raw material prices and fuel costs. That said, the rate of cost inflation was the lowest in four months and only slightly above the series average. This was in contrast to the rising inflationary trend among large enterprises.

Australian SMEs, however, could pass on rising costs at a slower rate to clients, leading to a third monthly fall in the rate of selling price inflation.

Finally, overall sentiment within the Australian SME sector remained positive at the start of the final quarter of 2023.

ALCHEMPro News Desk (DS)