Small business sales lift for second straight month as services lead the way: ANZ

Small business sales have lifted two months in a row, with automotive, hospitality, trades, and accounting and legal businesses shining in June, but the rag trade is suffering.

According to ANZ’s Small Business Sales Trends monthly report, small business sales rose in June, to be 6.6% higher year-on-year. The second consecutive monthly rise follows almost 12 months of declines. The results mean sales growth for small business in the year to date is 0.5%, versus negative 1.6% in 2010.

And in good news for Australia’s most populous state, New South Wales outperformed most other areas with a 7.1% annual increase, but Victorian small business led the way with a 8.4% jump in sales year-on-year.

Regional and rural businesses also outperformed, with 7% growth year-on-year, versus 6.4% elsewhere.

ANZ general manager of small business Nick Reade says the improved figures match a bias from SMEs towards revenue rather than costs. He adds that while the sales figures were patchy across Australia, the gap is narrowing both between states, and between regional and rural business versus their metro counterparts.

Reade says ANZ is seeing more buoyancy, and hopes this survey is a sign of more sustained growth.

The ANZ report is based on the value of credit and EFTPOS transactions processed through ANZ systems and transactions on its own cards processed through other systems. Business must be at least two years old with annual turnover of less than $5 million. The report excludes cash payments, so is not a full picture of small business payments, but represents 20% of card transactions.

Council of Small Business Organisations of Australia executive director Peter Strong welcomed the news, but said the body is hearing that SME’s stress levels are on the rise.

Strong says he has heard from small businesses that sales are rising, but they “say it not with a smile, but more with relief.”

“There’s relief that they’ve turned it around and are going in the right direction, but we are hearing a lot about rising power prices and wages.”

Gary Parkin, ANZ State Manager Small Business says there continues to be signs that retail is still lagging, particularly with more spending now happening on non-retail, services and food.

“While the growth improvement does give us hope, we need to be watchful for how it will play out over the second half of the year,” Parkin says.

ANZ Head of Australian Economics & Property Research, Ivan Colhoun says the growth rate in food sales might reflect some lingering food inflation, since the data shows growth in nominal sales.

“The same may also be true of small business restaurants, which recorded relatively strong growth in June (+9.4% y/y) and for 2011 to date (+8.8% y/y average),” Colhoun says.

Colhoun notes the jump in automotive sales might have been a reaction to delays from the Japanese earthquake, while increases in hotels and motels is not across the board, with anecdotal evidence suggesting wide variations across the country.

According to ANZ, this is the yearly growth, industry by industry:

• Automotive up 11.4% (car, truck and motorcycle dealers, auto parts and repairs, service stations, taxi cabs).
• Restaurants up 9.4% (restaurants, cafes and catering).
• Trade up 9.3% (construction materials, roofing, cleaning, plumbing, landscaping, tradespeople services).
• Business services up 8.8% (office supplies, accountants, advertising services, legal services).
• Other food outlets up 8.1% (fast food, bakeries, dairy product stores).
• Travel and entertainment up 6.8% (travel agents, caravan parks, movie theatres, video stores, amusements, luggage sales).
• Hotels and motels up 6.7% (Hotels, bars, beer and wine producers).
• Homewares and furniture up 5.4% (home and commercial furniture, drapers, flooring, antiques, homewares, art).
• Personal services up 5.3% (health and beauty services, cosmetics, dental, medical, childcare, gyms).
• Other retail up 4.5% (books, pharmacies, newsagents, grocery stores, convenience stores, speciality retail).
• Appliances and electrical up 4% (appliance stores, electronics stores, hardware equipment, computer stores).

Clothing and fashion contracted 0.5% in June.

State-by-state monthly growth:

• WA up 6.4%
• Qld up 6.1%
• SA up 6.2%
• Vic up 8.%
• NSW up 7.1%
• Tasmania up 2.8%
• NT down 0.8%
• ACT down 1.4