The latest report of the Fifth Quadrant SME Sentiment Tracker has revealed a sharp drop in confidence among SMEs with regard to both domestic and global economies due to the tariff wars that have been unraveling since the Trump administration took power in the United States.
From a 43 per cent figure recorded in February, the March data now reveals that 66 per cent of SMEs expect a weaker global economy and 56 per cent anticipate a weaker domestic outlook (up from 39 per cent).
Furthermore, 68 per cent of SMEs believe that the Trump administration will have a negative impact on the Australian economy as it contributed to the heightened concern around geopolitical tensions and associated supply chain challenges, on top of the longstanding economic uneasiness being felt by SMEs.
Compounding matters is the finding that SME revenues softened over the past month, with only 19 per cent reporting higher turnover compared to the same period last year. More concerning, 37 per cent are now reporting lower revenue, an increase from 31 per cent in January, with businesses in production, retail, and hospitality showing weak performance during Q1.
Consequently, the proportion of SMEs focused on growth declined to 34 per cent (down from 39 per cent in January), while 20 per cent are planning to downsize or exit – the highest level recorded in the past 12 months.
Hiring intentions also continue to decline, with only 10 per cent of SMEs planning to increase staff over the next three months (down from 15 per cent in December). Job vacancies have also dropped to 13 per cent following a temporary uptick in February.
FDemand for additional financing also fell to its lowest point in a year at eight per cent, particularly among smaller SMEs. On a positive note, loan stress has eased – from 12 per cent in December to 8 per cent due to falling interest rates, although this improvement could be short-lived in the current environment.
Given these conditions, the report highlighted the enormous pressure facing SMEs with regard to business planning and investment. More so, it also pointed out that things remain up in the air with regards how SMEs will fare in the future as such will largely depend on how tariff negotiations play out and whether businesses see a path to greater stability.
