Xero’s Managing Director for New Zealand & Pacific Islands, Craig Hudson, says the Xero Small Business Index was well above average in February rising to 114.5 points, largely driven by small business sales and wage growth.
Despite the surge in community Covid cases throughout February, sales were up 13.3 percent year-on-year (y/y), led by strong performance in the construction and manufacturing industries (up 16.8% y/y and 15.7% y/y respectively).
“While New Zealand has never seen such high numbers of Covid, our small business community is now used to adapting to disruption. The data shows the sector has done incredibly well so far with Omicron, however there are still challenges ahead with cases peaking in March.
“Hospitality was the only sector to see a decline in sales in February, down 3 percent y/y. Month in, month out, the data shows the hospitality sector is bearing the brunt of Covid’s impact. We need to be doing everything we can to support these small businesses as they face these tough times,” says Hudson.
Wage growth continues, jobs growth slows but remains solid
Wages rose 4.3 percent y/y in February, after a 3.7 percent y/y rise in January. All sectors saw wages grow in February led by construction (+5.1% y/y) and hospitality (+5.0% y/y).
“Rising wages across the small business sector is a good sign for the Aotearoa economy and should support further sales into the future,” says Hudson.
“However, it’s also a pressure point for small businesses that will ultimately drive up the cost of operations and could contribute to inflation if not matched by increased productivity.
“What’s behind this growth is increasing competition for staff, with both small and large businesses doing what they can to attract new talent.”
Small business jobs growth slowed in February, up 3.3 percent y/y, after a 6.0 percent rise in January (revised up from 4.1% y/y).
“While jobs growth has slowed, this pace of annual growth is still an impressive result considering Omicron’s disruption to workforces and the record low unemployment,” says Hudson.
Jobs growth was led by professional services (+9.2% y/y) and construction (+5.7% y/y).
“We’re not surprised to see a significant rise of people working in professional services - it’s an industry with high digitalisation rates where many small businesses can be fully operational while working from home. Construction is also thriving with the increase in jobs working to keep up with the industry’s 16.8 percent y/y sales growth.
“Interestingly, one of only two sectors to record a decline in jobs during February was agriculture (-4.0% y/y), the fourth consecutive decline in jobs in the sector.
“Accounting for seasonality, this also potentially points to the ongoing difficulty in attracting employees, especially while migrant workers are restricted due to ongoing border restrictions.”
Looking internationally, Australia’s Small Business Index rose slightly to 102 points, while the United Kingdom continues to struggle with a below average Index of 86 points.
“As the United Kingdom continues to struggle and Australia remains steady, but down on New Zealand, it’s encouraging to see our local small business economy performing well over February,” says Hudson.
For further information on the Xero Small Business Insights February 2022 metrics please refer to the XSBI Update for New Zealand.
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