Small Business Job Growth Remains Strong, Sales Show Modest Improvement

Data Influenced By Early Easter, Payment Times Impacted By End Of Financial Year

Xero, the global small business platform, today released its Xero Small Business Insights data for the March quarter, which revealed job growth remained strong for New Zealand small businesses, while sales made modest improvements to start the year.

Jobs rose 7.0% year-on-year (y/y) in the March quarter, the same result as the December 2023 quarter, and more than double the long-term average (3.0% y/y).

Xero Country Manager, Bridget Snelling, says the solid job growth is a promising indication small businesses are remaining hopeful during uncertain times.

“Small businesses remain eager to attract and retain talent, despite experiencing weaker sales,” says Snelling.

“This is likely a move to avoid history repeating itself when sales pick-up again, as many small businesses were impacted by the skill shortage during the post-pandemic period in 2021 and 2022.”

Across industries, the strongest jobs growth was in other services (+8.7% y/y) and professional services (+7.1% y/y), with manufacturing (+4.4% y/y) experiencing the smallest growth over this period.

For the March quarter, Hawke’s Bay (+9.9%) and Northland (+7.8% y/y) led jobs growth - both regions were severely impacted by Cyclone Gabrielle in early 2023, which has likely boosted these year-on-year results. Manawatu-Whanganui (+5.8% y/y) had the smallest rise, but still well above the long-term average job growth.

Sales make a modest improvement to start the year - March data impacted by early Easter

Looking outside of the March result, which was likely affected by Easter trading restrictions, small business sales had a solid start to the year, rising in January (+2.1% y/y) and February (+5.6% y/y).

This shows signs of improvement since the December quarter, when sales fell in December (-0.8% y/y) after hardly rising in November (+0.3% y/y) or October (+1.1% y/y).

This comes as the Consumers Price Index (CPI) increased 4% in the 12 months to the March 2024 quarter, with inflation now at the lowest rate since June 2021, signalling changing conditions of the local economy.

However, sales are still growing well below the long-term average (+7.0% y/y for January 2017 to December 2019). Sales also dropped significantly in March (-9.4% y/y); and is most likely due to the earlier timing of the Good Friday public holiday, when most businesses were closed and unable to trade.

Across all sectors and regions, sales dropped in March, which is a further indication that data for that month was significantly impacted by Good Friday falling in March for the first time since 2016.

“With the country in a technical recession and Kiwis cutting back on discretionary spending, our small businesses continue to operate under really difficult conditions,” says Snelling.

“Although it’s encouraging to see improvement compared to the end of last year, the truth is that there’s still a long way to go until our small business sales reach the long-term average.”

The best performing sector over January and February was other services (+6.8% y/y), followed by manufacturing (+3.4% y/y) and professional services (+3.4% y/y). Contrasting to this, agriculture had a decline in sales, down -0.9% y/y.

By region, sales growth over January and February was led by Hawke's Bay (+16.3% y/y) and Northland (+10.6% y/y). Similar to the jobs result, this is likely to be due to the very low sales this time last year due to Cyclone Gabrielle. Taranaki (-2.2% y/y) was the only region to record a decline in sales over this period.

“One year on from Cyclone Gabrielle, it will no doubt come as a relief to see the affected regions rebound in both jobs and sales, showing the resilience of local small businesses in the community,” says Snelling.

Wage growth up but still below average

Wages rose 3.0% y/y in the March quarter 2024, which is a slight increase from the December quarter (+2.8% y/y), but still below the 4.0% y/y result recorded in the March quarter 2023.

The largest wage rises were in manufacturing (+3.7% y/y) and construction (+3.5% y/y), with the smallest continuing to be agriculture (+1.8% y/y).

Payment times impacted by EOFY

The time small businesses waited to be paid after issuing an invoice was 22.9 days in the March quarter, a day quicker than in the December quarter. This was due to the month of March result, when payment time was only 20.7 days.

Improvement for payment times in March is likely due to the end of the financial year, a pattern in XSBI data which is often observed during the year-end in all countries tracked. However, these gains are often reversed in the following month, making this decline less pronounced over time.

“Although it’s good to see organisations prioritise paying their small business invoices on time to meet end of financial year deadlines, they need to shift the dial and get into the habit of doing this throughout the calendar year, not just when it benefits them,” says Snelling.

“Getting paid on time is crucial for small business operations and plays an important role in helping improve conditions for our small business economy.”

“We need to continue to support small businesses and shop locally where and when we can. It’s also crucial that small businesses lean on advisors for support and look to the digital tools available.”

The recent XSBI special report on small business labour productivity highlighted the benefits digital adoption can deliver to small businesses, helping them compete more effectively with larger businesses, and empowering them to generate larger profits, pay staff higher wages and cut prices for customers.

For further information on the XSBI March quarter metrics, please refer to the XSBI New Zealand update. To find out more about how XSBI is constructed, see the methodology.

[1] Other services include a range of personal services such as hairdressers, beauty, funeral and religious services.

[2] The impact of Easter varies from industry to industry. Hospitality and tourism businesses may get a boost over this holiday period. But most businesses lost a day of trade (Good Friday) in March when they would normally be open. There is an historical pattern in the XSBI data of fewer invoices being issued in the month that Easter falls in. This can result in a very weak sales growth result if the date for Easter falls in April one year but in March the next.

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