Small business confidence sturdy in face of negative consumer sentiment

by Adam Smith25 Jul 2014
Small business confidence has eased, but still remains strong in the face of negative consumer sentiment.

NAB's quarterly SME survey has found that SME business confidence fell slightly from its highs following last year's Federal election. The confidence index fell two points, but remained well above the survey's long-term average.

"SME confidence is still positive, supported by enthusiastic property and construction firms," NAB said.

But weak consumer sentiment could eventually impact on SME confidence, the bank predicted.

"How long confidence levels can be sustained will largely hinge on how consumers respond to concerns about their financial wellbeing, particularly in light of the Commonwealth Budget. Despite some recent improvement, consumer confidence measures are very weak, while NAB surveys of consumer behaviour suggest a degree of spending restraint is on the way," the bank said.

Should consumer spending taper off in light of lower levels of confidence, NAB forecast that SME confidence will be impacted.

"It seems unlikely that firms will maintain current confidence levels if this manifests into a significant pull-bacl in consumer spending," NAB said.