New Xero Data Reveals Growing Disconnect Between Wall Street and Main Street

San Mateo — March 3, 2026 —Xero, the global small business platform, today released its latest data on small business sales and payment times, revealing a widening disconnect between Wall Street and Main Street. These findings come from Xero Small Business Insights (XSBI), which uses aggregated and anonymized data from 32,000 of Xero's small business subscribers in the U.S., covering the past eight years (January 2017 through December 2025).

In 2025, the S&P 500 rose around 17% and nominal U.S. GDP averaged 5.1%, however, Xero’s data showed small business sales growth averaged just 2.4% year-over-year (y/y) over the entire year, around half the long-term average for this series (5.5% y/y).

In other words, small business growth did not keep pace with the broader economy or financial markets. This divergence suggests that headline U.S. economic figures and stock market performance are not reflective of the tougher conditions many small businesses are facing.

Sales momentum built through most of 2025, then faded later in the year

For much of 2025, the trajectory for small businesses appeared to be improving. Sales data increased gradually, rising 1.9% y/y in the March quarter and accelerating to 2.9% y/y in the June quarter. Growth strengthened further in the September quarter, reaching 4.1% y/y, including an impressive 7.1% y/y in September.

However, the final three months segued. Despite Federal Reserve cuts in October and December, sales growth slowed sharply, rising just 0.9% y/y in the December quarter - the slowest pace of growth since late 2023. The late-year deceleration coincided with the delayed effects of tariffs working their way through the economy.

“The December quarter showcased just how quickly conditions can shift,” said Louise Southall, Economist at Xero. “While interest rate cuts can support confidence, the delayed impact of tariffs were still working their way through the system. For many small businesses, those pressures can dampen demand and slow momentum, even when broader Wall Street indicators appear strong.”

Payment times improved, offering cash flow relief

While sales momentum weakened later in the year, payment metrics moved in the opposite direction, providing a glimpse of optimism. Late payments shortened every quarter in 2025, falling from 9.3 days in the March quarter to 7.8 days in the December quarter, marking the shortest payment period in four years and one full day below the long-term average of 8.8 days recorded in this series.

There was a similar, but more moderate improvement in the average time small businesses waited to be paid after issuing invoices. Time to be paid declined from 29.2 days in the March quarter, steadily throughout the year to 27.9 days in the December quarter. This is the shortest time to be paid since December 2021 and also one day below the long-term average of 28.9 days.

Looking ahead: uncertainty remains the key risk

With 2026 underway, one of the central challenges for small businesses remains continued uncertainty. Frequent shifts in economic policy - from interest rate adjustments to tariff measures - create unpredictability around pricing, costs and customer behavior. Even supportive actions such as rate cuts can be offset by other policy pressures working through the system with a lag.

“Xero’s data shows two trends moving in different directions,” said Andrew Kanzer, Managing Director of North America at Xero. “Payment performance improved steadily across the year, which supports cash flow and financial stability. However, sales growth softened later in the year underscoring just how exposed small businesses are to shifts in economic policy and cost structures. Until demand growth becomes more durable and policy direction more predictable, maintaining disciplined cash flow and cost management will remain essential for small businesses to continue navigating the uncertain environment.”

To access the latest data, visit the XSBI website.

ENDS

Media Contact

Xero US | Rola Tfaili | rola.tfaili@xero.com

About Xero

Xero is a global small business platform that helps customers supercharge their business by bringing together the most important small business tools, including accounting, payroll and payments — on one platform. Xero’s powerful platform helps customers automate routine tasks, get timely insights, and connect them with their data, their apps, and their accountant or bookkeeper so they can focus on what really matters. Trusted by millions of small businesses and accountants and bookkeepers globally, Xero makes life better for people in small business, their advisors, and communities around the world. For further information, please visit xero.com.

About Xero Small Business Insights

The aim of Xero Small Business Insights is to create insights to help inform decision makers in support of the small business economy as a whole. The principal source of small business insights in this report is customer data from Xero - a small business platform that supports online accounting and a range of other applications. Xero is a responsible custodian of our customers' sensitive data and does not release any data that could identify individual businesses. The data used is aggregated and anonymized to ensure the privacy of Xero subscribers, and their counterparts.

As part of the program, we publish regular blogs and research notes and deep-dive special reports on specific small business topics. These can all be found at xero.com/xerosbi.