Small Business Data Reveals Declining Sales, Slower Wage Growth

Wellington — 31 October 2024 — Xero, the global small business platform, today released its Xero Small Business Insights (XSBI) data for the quarter to September, revealing continued sales declines, slowing wages growth, and that close to a third of small businesses are reducing their workforces.

Small business sales fell 2.7% year-on-year (y/y) in the quarter to September, a bigger decline than the 1.4% y/y fall recorded in the quarter to June 2024.

All tracked industries aside from ‘other services’ (+1.3% y/y) and all tracked regions across Aotearoa New Zealand, experienced declining sales this quarter.

The largest declines were in construction (-5.1% y/y), agriculture (-4.1% y/y) and retail trade (-4.0% y/y). Regional falls ranged from -6.0% y/y fall in Taranaki to -0.9% fall in Northland.

Likely influenced by declining sales, wage growth slowed in the quarter to be 2.8% y/y, down from the 3.7% rise from last quarter. Wage growth is now significantly less than the pre-pandemic average of 3.9%.

While jobs are still growing, up 6.6% y/y this quarter, a closer look at the data shows this growth is fuelled by only 27.2% of small businesses. This is an indication that this job growth is concentrated in an increasingly small proportion of businesses.

XSBI reveals 31.3% of small businesses are downsizing their workforce, the highest proportion of firms reducing their workforce since early 2020 when lockdowns impacted the business landscape.

The job downsizer data measures the proportion of firms that downsized their workforce over the past year and the job creator data shows the proportion of firms that grew their workforce over the past year.

The hospitality, manufacturing and construction industries were particularly impacted in the quarter to September, with 45.3%, 34.9% and 33% of small businesses within these industries decreasing their workforces respectively over the past year.

Meanwhile Auckland has seen the largest proportion of small businesses decreasing their workforces over the September quarter, with 34.1% of firms shrinking their workforces in the past year.

Hawke’s Bay had the largest share of businesses adding staff, with 30% of small businesses growing their workforces in the past year.

Bridget Snelling, Country Manager - Aotearoa New Zealand at Xero, says ongoing declining small business sales are beginning to impact other key metrics.

“Outside of a couple of months, small business sales have been flat or declining over the last 12 months. The recent data shows this is now impacting wages growth and a growing portion of small businesses are reducing their workforces,” says Snelling.

“Across the ditch, small businesses are seeing something quite different. Their sales are up +3.5%, more small businesses are growing their workforces than decreasing them, and wage growth is close to the pre-pandemic average. Across the ditch and the growth in Australia is below average too, which adds context to the challenges the Aotearoa New Zealand small business community is facing.

“It’s clear many small businesses across New Zealand are yet to feel the benefit of the OCR cuts that began in August, or the income tax cuts that began on 31 July.

“We need to be doing 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 showed late payments cost Kiwi small businesses $827 million last year. We must all do our part, especially the large organisations with unacceptably long payment terms.”

About Xero

Xero is a global small business platform with 4.2 million subscribers. Xero’s smart tools help small businesses and their advisors to manage core accounting functions like tax and bank reconciliation, and complete other important small business tasks like payroll and payments. Xero’s extensive ecosystem of connected apps and connections to banks and other financial institutions provide a range of solutions from within Xero’s open platform to help small businesses run their business and manage their finances more efficiently.

Disclaimer

This media release includes and is in parts based on assumptions or estimates. It contains general information only and should not be taken as taxation, financial, investment or legal advice. Xero recommends that readers always obtain specific and detailed professional advice about any business decision. The insights in this release were created from the data that was available as at the date it was extracted. Data used was anonymised and aggregated to ensure individual businesses can not be identified.

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