The country's small businesses saw sales plummet 8.3% in June compared with June 2023. It was the largest monthly year-on-year fall since May 2020 during the pandemic lockdown.
Global small business platform Xero has released its Xero Small Business Insights data for the June quarter, which show that small business sales fell 1.5% year-on-year across the June quarter. (The methodology behind the insights data can be viewed here).
But in common with other high frequency data released recently, the Xero figures are showing June in particular to have been a very difficult month for Kiwi businesses. And while GDP figures for the June quarter will not be released till September 19, economists are already expecting that the figures will show the economy to have contracted during the quarter.
According to the Xero data, the sectors hardest hit in June were hospitality down 10%, construction down 10% and retail trade down 11.4% compared with the same month in 2023.
Xero's NZ head of sales Paul Churchman said 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".
"After what looked to be a more positive start to 2024, this sharp decline in sales suggests small businesses are not faring so well," Churchman said.
He said all industries experienced a sales decline in June, while across the quarter, only two recorded positive sales growth - real estate (+0.9% y/y) and other services (+0.1% y/y).
All regions tracked recorded a decline in sales in the month of June, with Waikato (-13.5% y/y), Taranaki (-11.7% y/y) and Manawatu-Whanganui (-9.9% y/y), experiencing the sharpest drops. For the quarter as a whole, the only rise was in Northland (+1.5% y/y), while the largest falls were in Waikato (-4.7% y/y) and Taranaki (-2.6% y/y).
Compared with international counterparts, New Zealand experienced the largest monthly sales drop in June, more than double Australia’s (-3.5% y/y), and more than the UK’s (-5.2%).
Xero says its product is now available in more than 180 countries, with over 4.2 million subscribers. As per Xero's financial results for the year to March 2024 the company had over 600,000 subscribers in NZ.
Xero says that for its business insights sales data is drawn from businesses who use Xero’s invoicing platform to issue invoices (including via apps linked to a Xero account) to customers.
"We measure sales growth based on the face value of invoices issued by firms within each month," Xero says.
"We also apply a number of filters to both the sample of invoices and the sample of firms to achieve a high quality sample of small businesses which we analyse and draw our insights from. In particular: we exclude trusts, clubs & societies, and other unclassified organizations; and we restrict to small businesses by excluding firms who recorded annual sales greater than each country’s small business revenue threshold."
Despite the latest fall in sales figures, the latest Xero data shows that small businesses are still attracting staff, with jobs rising 6.7% y/y over the June quarter, slightly below the 7.0% rise in the March quarter.
"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," Churchman said.
"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."
Churchman said the latest data is a reflection of "just how challenging the market is for small businesses at the moment".
"We need to continue supporting our small businesses by shopping locally where we can.
"It’s also crucial for small business owners to stay across their finances and consider working closely with a financial advisor."
We welcome your comments below. If you are not already registered, please register to comment
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.