SMEs are seeing a gradual fall in supply chain pressures, with further improvement expected in the next 12 months
Australian SMEs are experiencing a gradual easing of supply chain pressures, with further improvement expected in the next 12 months, according to NAB’s Quarterly Business Report for Q2 2023.
Across most industries, supply conditions have shown signs of improvement. However, the manufacturing and retail sectors have been the most impacted, while business services and accommodation and hospitality have experienced relatively fewer challenges, NAB reported.
In the second quarter, supply chain issues continued to moderate for the fourth consecutive quarter. SMEs rated the extent to which it affected their business over the past three months at 3.8 out of 10, a slight decrease from the previous quarter's score of 4.0. This is also significantly lower than the survey's peak score of 5.1 at the same time last year.
Looking ahead, SMEs anticipate even less disruption from supply chain issues, with an overall score of 3.7 for the next 12 months (down from 3.8 in Q1 and 4.8 at the same time last year).
Challenges vary
Supply chain challenges varied across different states in the past three months. Tasmania recorded the highest score of 4.8, indicating an increase in supply chain disruption, while New South Wales and Queensland reported the lowest scores of 3.5. Looking ahead, SMEs in most states are more optimistic, expecting fewer supply chain issues in the next 12 months, NAB reported. However, Tasmania and South Australia anticipate a score of 4.9 and 3.7 respectively, suggesting a potential increase in challenges. Western Australia showed the most significant improvement, with a score of 3.9, while New South Wales maintained the highest level of optimism with a score of 3.4.
In terms of industries, supply chain disruptions decreased for most sectors in Q2, except for personal services (3.7) and business services (2.7). The retail sector experienced the greatest impact with a score of 4.9, followed by wholesale trade (4.6) and construction (4.2). On the other hand, accommodation and hospitality (1.4) and health services (2.3) reported the fewest issues.
Mixed expectations
Looking ahead to the next 12 months, SMEs have mixed expectations. Construction (4.2), accommodation and hospitality (1.1), and transport and storage (3.7) anticipate the most improvements in supply chain issues. However, personal services (3.5) and business services (2.6) expect challenges to be somewhat more significant compared to the previous quarter.
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The number of SMEs who considered supply chain issues as "very significant" for their business continued to decline in Q2, according to the report. Only 12% reported it as a significant concern in the past three months, compared to 15% in Q1 and a significant drop from 31% at the same time last year. Looking ahead, approximately 11% of SMEs anticipate supply chain issues to be a significant challenge in the next 12 months, consistent with Q1 and significantly lower than the previous year's figure.
Regional numbers
Regionally, New South Wales experienced a sharp decline in the number of SMEs reporting a very significant supply chain impact in the past three months, with only 8% compared to 14% in Q1.
Queensland (14%) and Victoria (15%) also reported lower figures, while Tasmania remained unchanged at 8%. However, South Australia saw a doubling to 16%, and Western Australia showed a slight increase to 17%.
By industry
Regarding specific industries, fewer SMEs across all sectors reported a very significant supply chain impact in Q2, except for personal services (17%), health services (9%), and manufacturing (18%).
Wholesale trade (12%) and transport and storage (9%) experienced comparatively lower levels of disruption.
Overall, manufacturing and retail had the highest percentage of SMEs reporting supply chain issues as very significant (18%), while business services (3%) and accommodation and hospitality (4%) had the lowest figures, NAB reported.
12-month outlook
Looking ahead, the number of SMEs expecting significant supply chain issues in the next 12 months decreased significantly in transport and storage (6%) but rose sharply in personal services (17%) and finance and insurance, NAB reported. It was lower in all other sectors except health services (9% vs. 3%), with business services (2%) and accommodation & hospitality (4%) having the lowest overall expectations.
An earlier NAB report found that conditions for small businesses were worsening, with employment and profitability particularly weak. Recent ABS data revealed that retail sales volumes dropped in Q2, marking the third straight quarter of decline.
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