We today released new data on the health of Australia’s small businesses in July, and the results are illuminating. While many small businesses are doing it tough, there are some encouraging signs.
Based on anonymised and aggregated data from hundreds of thousands of customers, the latest Xero Small Business Insights data shows for the second month in a row, businesses continued to add jobs, albeit at a modest pace of 0.5% month on month in July.
Small business revenue also recovered strongly in July, and is now only 1.9% lower than a year ago, after being 10.9% lower in June.
To be sure, the coming months’ numbers will more fully flesh out the picture. Melbourne entered Stage 4 lockdown shortly after these figures were compiled. And the July data reflects businesses that are visibly operating; those which reported no revenue or payroll aren’t captured.
That said, the directional trends in July are intriguing and bear a closer look.
Victoria outperformed by other states
Small businesses in Victoria recorded more subdued revenue growth in July at 3.2% lower than a year ago. The state’s small businesses also saw a 2.5% month-on-month fall in jobs in July, led by declines in hospitality and arts & recreation, due to the return to lockdown.
On the other hand, the smaller population states of Western Australia (+1.8%), South Australia (+1.9%)and Queensland (+2.5%) recorded faster job gains than the +0.5% national average.
The figures underscore how the different levels of restriction in states across Australia have affected the pace at which small businesses rebound. While the impact of Melbourne’s return to Stage 3 lockdown muted the nation’s revenue and job growth in July, the data also suggest how small businesses can play a key role in jumpstarting Australia’s economy.
Manufacturing leads the rebuild
The recovery in small business revenues is being led by the manufacturing sector, where revenues were 11% higher than in July 2019. This is the second consecutive month that the sector has reported positive annual revenue growth. The gains were recorded in all states, led by manufacturers in South Australia.
All small business sectors are employing staff at lower levels than before the pandemic, including manufacturing which was still down 3%. The hardest hit sectors remain hospitality and arts and recreation. July employment, in the latter, is down 21% from pre-crisis levels, compared to the -31% low point experienced earlier in the pandemic.
It’s nevertheless encouraging to see manufacturers continuing to drive small business recovery, and to see a slight improvement in the arts and recreation sector.
With Melbourne entering Stage 4 restrictions and the rest of Victoria entering Stage 3 in August, we may see small business performance in some of the state’s biggest sectors – like construction and retail – affected in future Small Business Insights data. Stay tuned for our next update!