Xero Small Business Insights (XSBI) data for the quarter to September revealed continued sales declines, slowing wage growth, and close to a third of small businesses reduced their workforces.
Small business sales fell 2.7 percent year-on-year (y/y) in the quarter to September, a bigger decline than the 1.4 percent y/y fall recorded in the quarter to June 2024.
All tracked industries except ‘other services’ (+1.3 percent y/y) and regions across New Zealand experienced declining sales this quarter.
The most significant declines were in construction, agriculture, and retail trade. Regional falls ranged from -6.0 percent y/y fall in Taranaki to -0.9 percent in Northland.
Likely influenced by declining sales, wage growth has become significantly less than the pre-pandemic average of 3.9 percent.
While jobs were still growing, a closer look at the data showed that this growth was fuelled by only 27.2 percent of small businesses. Job growth was concentrated in an increasingly small proportion of businesses.
XSBI revealed that 31.3 percent of small businesses were downsizing their workforce, the highest proportion of firms reducing their workforce since early 2020 when lockdowns impacted the business landscape.
The hospitality, manufacturing, and construction industries were particularly impacted in the quarter to September, with small businesses within these industries decreasing their workforces over the past year, respectively.
Meanwhile, Auckland has seen the largest proportion of small businesses decreasing their workforces over the September quarter, with 34.1 percent of firms shrinking their workforces in the past year.
Hawke’s Bay had the largest share of businesses adding staff, with 30 per cent of small businesses growing their workforces in the past year.
Bridget Snelling, Country Manager - New Zealand at Xero, said declining small business sales were beginning to impact other key metrics.
“Outside of a few months, small business sales have been flat or declining over the last 12 months. The recent data shows this is impacting wage growth, and a growing portion of small businesses are reducing their workforces,” said Snelling.
“Across the ditch, small businesses are seeing something entirely different. Their sales are up +3.5 percent, more small businesses are growing their workforces than decreasing them, and wage growth are close to the pre-pandemic average. Across the ditch, the growth in Australia is below average, too, which adds context to the challenges the New Zealand small business community faces."
She said it was clear that many small businesses across New Zealand have yet to feel the benefits of the OCR cuts that began in August or the income tax cuts that began on the 31st of July.
“We must do what we can to support small businesses during these challenging economic times. This can be as simple as shopping locally or paying all invoices as soon as possible.”
Recent Xero research also showed late payments have costed Kiwi small businesses NZD 827 million last year.
“We must all do our part, especially the large organisations with unacceptably long payment terms.”
Read more from the SME Network blog here