Xero’s latest Small Business Insights (XSBI) data for June record Kiwi small businesses have seen the biggest decline in sales since May 2020, the first lockdown in New Zealand due to Covid-19.
At the beginning of the year, Xero reported positive records for Kiwi small businesses, but for the past two months, sales have been on the decline, with the biggest drop in June at -8.3%.
Paul Churchman, Xero NZ Head of Sales, says the declining sales growth is a concerning indication small businesses are facing pressure from the country’s turbulent economy.
“This sharp decline in sales suggests small businesses are not faring so well.
“The latest inflation figure from Statistics New Zealand was 3.3% for the June quarter. Adjusting the nominal XSBI data to real data, this indicates small business sales are even weaker, down 4.8% in the June quarter.”
All industries are reporting a negative in sales, with the exception of real estate at +0.9% and other services at +0.1%.
Retail (-3.3%), construction (-3.4%) and hospitality (-3.7%) were the hardest hit industries in this decline.
“These three industries are all particularly sensitive to the impact of high interest rates, as consumers tighten their purse strings, paring back their non-essential spending, and delaying big purchases,” says Churchman.
Read more: Futureproofing your business: why half of Kiwi businesses go up for sale
In terms of regions, Waikato (-13.5% y/y), Taranaki (-11.7% y/y) and Manawatu-Whanganui (-9.9% y/y) experienced the sharpest drop.
Northland is the only region that recorded an increase at +1.5%.
As a global platform, Xero was able to compare New Zealand’s statistics and Kiwis have recorded the lowest drop compared to its international counterparts. Australia at -3.5% y/y and the UK at -5.2%.
Despite the low records in sales, jobs and wages are steady across the board, with jobs rising 6.7% and wages up 3.6%.
“This steady jobs growth reflects how small business owners remain hopeful about the future, ensuring the small business sector is prepared and fully resourced for when economic conditions improve,” says Churchman.
“We’ve also seen a number of redundancies across big firms and the public sector, potentially providing Kiwis with an opportunity to slot into new small business roles. While it’s encouraging to see small businesses so optimistic, this form of labour management won’t be sustainable long term if sales continue to decline.”
With this data, Churchman says this is a sign to continue supporting Kiwi small businesses by shopping locally when possible.
