Regional small business sales outstrip metro counterparts

ANZ today released its Small Business Sales Trends report for June which showed that small business sales rose by 2.8% y/y in June and by 3.0% over the year to the June quarter.

Sales growth across the regional and rural areas of Australia continued to outstrip sales in the metro areas, with sales up 4.1% y/y compared with 2.1% y/y for metro. The mining states of Western Australia and the Northern Territory, and to a lesser extent Queensland, continued to report robust small business sales, while sales in South Australia, Tasmania and the ACT remained much weaker.

ANZ General Manager of Small Business Nick Reade said: “For a while now we’ve been seeing small business sales in the regional and rural areas outstrip their metro counterparts, and it’s again evident this month with sales up 4.1% year-on-year and similarly 4.1% on a year-to-date basis, compared with 2.1% year-on-year and 3.1% year-to-date for metro.

“Reports from our staff serving regional small business customers also confirm that sales in those rural areas are fairing well, with strong sales in regional areas likely to be linked to the growth in the mining states.

“More broadly, we’re seeing our small business customers enquiring about new finance to fund growth plans, but there remains a high level of consciousness about cost management with many small businesses still struggling to move existing stock.

“Although it’s pleasing to see almost 3% year-on-year sales growth across the board this month, it’s not quite where we want it to be. We need to keep a careful eye on the sectors which remain under pressure, such as the retail-related industries of clothing and fashion and appliances and electrical, to ensure we’re providing them with the right support to navigate through these uncertain trading conditions,” Mr Reade said.

ANZ Senior Economist for Australia, Justin Fabo, said: “Small business sales in June showed the familiar divergence between trading conditions in parts of the retail sector and other industries.

“Over the year to the June quarter, sales at small electrical, furniture and clothing stores actually declined but solid growth was typically seen by small food retailers and many businesses in the various services sectors. This pattern has also been reflected in other economic indicators and partly reflects that some small businesses are facing price deflation from the high Australian dollar, which is crimping profitability even though sales volumes for some businesses might be travelling along reasonably well.

“Sales of construction and other trade-related materials have weakened recently in line with more subdued housing market activity. Data for the month of June provides some very tentative evidence that the series of interest rate cuts by the RBA since November last year is starting to support spending at small retailers. Sales will also have received a modest, but temporary, boost from the Federal Government's payments to households in May and June.

“Across the states, small business sales activity has been quite varied. National sales growth has been supported by strong outcomes in the resources states of Western Australia, Northern Territory and to a lesser extent Queensland. Small business sales have been noticeably weaker in other states, particularly Tasmania, South Australia and the Australian Capital Territory. Growth in sales in the most populated states of New South Wales and Victoria has remained relatively soft but sales outcomes in NSW appear to be improving modestly while softening a little further in Victoria,” Mr Fabo said.

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