Global small business platform Xero recently released its Xero Small Business Index for the June 2023 quarter, which showed small business job growth remained strong despite flatlining sales.
The Xero Small Business Index shows sales rose 5.9 percent year-on-year in June 2023, with an average growth of just 3.9 percent y/y in the June 2023 quarter.
This was down from a 4.2 percent average for the March 2023 quarter, and well below the 12.9 percent y/y average over the whole of 2022.
“While 5.9 percent year-on-year growth may seem positive, this is still a step behind the latest inflation figures,” Xero country manager Bridget Snelling says.
“The country officially entered recession during the March quarter, which appears to be having a negative impact on both business confidence and sales.
“As households continue to struggle with the cost of living, it’s only natural we see people reduce their discretionary spending.”
Matamata plumbing and roofing business Comag Limited general manager Hayden Wright says, while their household market is slowing they are still experiencing sales growth especially in large-scale commercial projects.
“We’ve noticed a slowing in local areas and people seem to be putting off the day-to-day maintenance like fixing tap washers. But there is definitely still strong growth in the commercial sector.”
While the large -scale roofing and plumbing projects are keeping Comag busy it also means they are reliant on hiring contractors to keep up with the workload.
“We’ve definitely got the capacity for more skilled plumbers and roofers.”
The increase to the minimum wage, which Comag pay their apprentices, has hit hard with a flow on effect increasing wages across the board.
Hayden says training apprentices is important to Comag’s growth and they make up a third of the 50-strong crew.
“We train our own and then we get the best out of them. While school leaving apprentices are paid minimum wage we’re not required to. We can pay them a training wage.”
The cost of living crisis, Hayden believes, is exacerbated by the rising minimum wage.
“When you put the minimum wage up everything goes up.”
Snelling says the Xero index shows that alongside strong jobs growth, wage growth cooled to just 2.9 percent y/y in June 2023 and averaged 3.5 percent y/y for the June 2023 quarter.
“This downturn from the significant peaks seen throughout 2022 will likely be welcome news for many small business owners across Aotearoa New Zealand.
“However, lower wages could also point to more pressure for household budgets and a potentially further flattening of sales.”
“Overall, the XSBI results reflect a level of resilience in Kiwi small businesses, despite the weaker sales data being consistent with New Zealand’s recession.
“Despite this, the road ahead is still challenging for our small business owners. They continue to walk the tightrope to balance books and maintain their bottom line while still providing for their staff and themselves.
“We can take solace in the fact the Official Cash Rate seems to have plateaued at least for the time being, which hopefully translates into a slowdown in mounting financial pressures for households and business alike.
“We encourage small business owners to consider the digital tools available to them in order to manage their cash flow during these trying times, as well as encouraging Kiwis to pay their invoices on time where possible to support the flow of money through the small business economy.”
