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The latest data from CreditorWatch shows trade receivables and other key indicators going down, and a bleak outlook for next year.
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Brace yourselves for joyless Christmas, business warned
15 December 2022
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10 minute read
Businesses should brace for subdued Christmas trading because this year lacks the usual consumer momentum, CreditorWatch says in its November Business Risk Index.
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It said its key indicator of trade receivables was heading south while external administrations leapt 26 per cent from October to November, compounding a 24 per cent increase year-on-year.
At the same time, credit enquiries by business were up 87 per cent year-on-year and 61 per cent since last month, reflecting the increased caution and declining business confidence reported by the NAB Business Confidence Index.
CreditorWatch chief economist Anneke Thompson said this month’s data held some seasonal surprises.
“While we usually see a run-up in trade receivables as Christmas approaches, this key indicator of business activity has been flat since July and declining since September,” she said.
“It appears the bounce back in activity that many businesses felt in the early stages of 2022 after a difficult 2021 is starting to wane.
“A few months ago, we were expecting a strong run-up to Christmas before consumers started to shut their wallets, with businesses closely following. This scenario appears to have happened a bit earlier than expected.”
She said strong employment and consumers with cash in their pockets were positive signs, but most spare money was being put towards home loan repayments, energy, food and other essentials.
Employment and GDP growth were strong, although the numbers were still influenced by the emergence from pandemic lockdowns.
However, business-to-business trade receivables are down 16 per cent quarter-on-quarter and month-on-month B2B payment defaults were very volatile, decreasing by 25 per cent from last month on a generally increasing trend.
CreditorWatch CEO Patrick Coghlan said interest rates increases were hitting home and businesses should take a cautious approach ahead of the holiday period.
“Flat year-on-year trade growth in the month of November points to subdued trade activity in December, however, it appears that the RBA’s rate rises this year are beginning to bite and having the desired impact on inflation,” he said.
Ms Thompson said Black Friday sales would give November data a bump, but monthly turnover fell across all the major retail trade categories except food, with department stores recording the biggest drop in turnover at 2.4 per cent.
In CreditorWatch’s November data, businesses look set to experience far more challenging conditions in 2023.
“We are seeing a clear rise in businesses recording trade defaults against another business, with no commensurate rise in trade activity,” the report said.
“Coupled with slowing retail trade data, near record-low consumer confidence and falling business confidence, the signs are all there that the RBA’s monetary policy tightening cycle is now having its desired impact.
“It is too early to say how hard the landing will be for the Australian economy in 2023, although conditions here certainly look brighter than in other parts of the world.
“We are now seeing a plateau, or fall in some cases, of jobs available, and more people applying for jobs that do come up. Nevertheless, most people who want a job at the moment can get one and incomes are rising, albeit at levels far below that of the rate of inflation.
“Anecdotally, businesses are not yet in a position where they are having to lay off workers (as is happening in some parts of the world — particularly the tech sector in the US), however, it is likely, and we are hearing of businesses pausing hiring activity at least for the next few months until a clearer picture of economic conditions in 2023 materialises.”
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