Delta lockdowns hit Aussie business turnover

Monthly business turnover indicator

In August, business turnover rose the most for Transport, postal and warehousing (up 2.8 per cent).

But turnover fell by the most in August for Accommodation and food services (down 6.5 per cent).

Monthly business turnover indicator – August 2021

• The Australian Bureau of Statistics (ABS) has released the “Monthly Business Turnover Indicator” publication for the first time.

• The timely indicator is calculated from business activity statements (BAS) provided to the Australian Taxation Office (ATO) and covers 13 of 19 industries, including mining, manufacturing, utilities, gas, water, construction, retail trade, wholesale trade, accommodation and food services and transport. Businesses with GST turnover of $20 million or more are required to submit monthly statements, while some smaller firms do so voluntarily.

• Today’s release covers the period to August 2021, including Covid-19 disruptions to the economy.

So what is business turnover? Turnover is typically the total sales made by a business over a certain time period and is also referred to as gross revenue or income. By contrast, profit is a measure of earnings.

• The ABS publication offers rich insights into business turnover, with a key focus on the impact of specific industries from the Covid-19 health crisis and associated government restrictions, such as lockdowns and border closures.

• Of course, the services sector has been hardest hit by social distancing measures during the pandemic. The latest IHS Markit purchasing managers survey showing that activity in the services sector contracted for a third successive month in September due to Delta lockdowns in Australia’s south-east.

• Today’s ABS data continues to show a continuing pandemic trend in the economic data with business turnover down by the most in August being: Accommodation and food services (down 6.5 per cent); Other services (down 5.5 per cent); and Arts and recreation services (down 5.1 per cent). Border closures and government ‘stay-at-home orders’ to contain Covid-19 outbreaks have heavily impacted business confidence and conditions in these industries with measures of business conditions – such as profitability, trading and employment – consistently weak in monthly NAB business surveys.

• But the pandemic continues to have an uneven impact on Aussie businesses with some benefitting from excess household savings, policy stimulus and a re-direction of discretionary spending away from travel to domestic goods and services. And many Aussies have pivoted from shopping at malls to buying online.

• Business turnover for Transport, postal and warehousing (up 2.8 per cent) may have lifted in August due to an increase in demand for road transport freight and postal services due to lockdowns. And Australia’s ongoing shift towards the ‘knowledge economy’ with ‘white collar’ workers able to work-from-home during lockdowns likely boosted business turnover in Professional, scientific and technical services (up 2.7 per cent).

• While timely, today’s release from the ABS is backward-looking with Greater Sydney and the ACT both emerging from lockdowns, while regional NSW and Victoria will follow as vaccination rates reach 70-80 per cent thresholds in the coming weeks. In fact, the reopening of economies and eventual return to travel will likely boost business turnover for the Retail trade, Accommodation and Food services, and Arts and Recreation services industries. That said, on-again-off-again Covid restrictions could persist as Aussies ‘learn to live’ with Covid.

• The data serves to highlight the damage done to businesses during recent Covid-19 Delta outbreaks and lockdowns. The NAB business survey, released on Tuesday, showed that predominantly larger firms were more confident in September, driven by rising vaccination rates, reopening roadmaps and a partial end to economic shutdowns in Australia’s south-east. But in reality business conditions for businesses remained challenging amid persistent government restrictions, border closures, supply chain disruptions, rising energy costs and labour shortages. Policy settings remain supportive of consumers and businesses, but there is a significant amount of uncertainty about how Australians will ‘live with Covid’ as the economy reopens and restrictions are wound back.

• ACA Research and Fifth Quadrant’s Covid-19 SME sentiment tracker of 400 firms of up to 500 employees conducted from September 6-13, 2021, showed that 57 per cent of SME’s reported a decline in revenue in September due to government lockdowns and restrictions. And in NSW, more than two-thirds of respondents reported lower revenues. In-line with falling revenues, 38 per cent reported an operating loss with half of business owners concerned about their survival. In response, 17 per cent of SME’s temporarily or permanently closed in September with 27 per cent reducing operational costs and 15 per cent requesting rental relief from their landlords. And just 10 per cent of business owners have plans to expand over the next 12 months with business investment expectations remaining weak. While 18 per cent 18 per cent of SME’s reported that they will require additional finance over the next three months.

• And Xero’s Australian Small Business Index fell by 9 points to 92 points in August.

• According to Xero, sales grew by 6.4 per cent in August from a year ago, up from a 4.2 per cent annual growth rate in July. By region, Western Australia (+12.8 per cent), Queensland (+10 per cent) and South Australia (+9.3 per cent) were the strongest performers, followed by Victoria (+6.7 per cent), ACT (+3.1 per cent) and NSW (+3.1 per cent). By industry, the hardest hit sectors were hospitality (-11.4 per cent) and arts and recreation (-6.5 per cent), while the strongest sectors were healthcare (+14.8 per cent) and real estate services (+11 per cent).

• Also, Xero’s measure of ‘the time small business had to wait to be paid by customers’ lifted by 0.5 days to 23.7 days in August, its highest level since September 2020. The late payments measure lifted to 7.2 days, meaning businesses are, on average, being paid over a week late.

Published by Ryan Felsman, Senior Economist, CommSec