After a modest month of growth in October of 8.2 percent year-on-year (y/y), small business sales continued to grow in November - up 15.8 percent y/y.
Xero’s Managing Director for New Zealand & Pacific Islands, Craig Hudson, says this result was likely spurred on by the reopening of in-store retail shopping in Auckland early in the month, alongside Christmas and retail sales.
“Unsurprisingly, Auckland saw the strongest improvement in sales month to month, up 17.2 percent y/y in November, after 5.5 percent y/y growth in October,” says Hudson.
“As soon as retailers who could observe social distancing opened on the 10th of November, it’s been clear that Aucklanders are ready to get out of their homes and back to living their lives.
“It’s encouraging to see local small businesses included in this spending, especially as we head into the summer holiday season.”
Small business sales up nationwide
Sales growth was recorded across the country in November with Bay of Plenty (+18.1% y/y), Canterbury (+18.0% y/y) and Wellington (+17.8% y/y) delivering the strongest sales growth across the regions.
The standout sectors for bouncebacks in sales growth were construction (+21.8% y/y compared to 10.8% y/y in October), retail trade (+18.1% y/y, compared to 5.6% y/y in October), and manufacturing (+17.7% y/y, compared to 6.9% y/y in October).
“Broadly speaking, these figures point towards a recovering small business economy - both regionally and across industries. While there are still areas suffering, it’s encouraging to see the dial shifting in the right direction,” says Hudson.
“With many hospitality businesses still closed for the majority of the month, November sales were down 5.9 percent y/y. However, when compared to October and September (-10.2% y/y, -20.4% y/y respectively), the November result is a step in the right direction.
“However, while the roll out of the vaccine passport means many can begin opening in some capacity, we expect ongoing restrictions to still continue to hamper a full recovery.”
Job growth solid but slowed
Despite seeing a slowdown during the month, jobs rose 2.4 percent y/y in November - down from 3.8 percent y/y growth in October, but are only just below the long term average of 3.0 percent y/y.
Auckland saw the softest growth of all regions for the second month in a row, with jobs rising 1.8 percent y/y after a 2.8 percent y/y rise in October, followed by Otago (+3.1% y/y), Bay of Plenty (+3.2% y/y) and Waikato (+3.2% y/y).
In contrast, Wellington (+6.2% y/y) and Canterbury (+4.2% y/y) continued to record above-average rises.
“One potential explanation for the slight slowdown in jobs growth is that the small business community began preparing for the November reopening by making employment arrangements in October,” says Hudson.
“Looking at industries, only agriculture (-2.2%y/y) and hospitality (-11.5%y/y) saw job figures worsen; although, this is the third month of weak results for both sectors.”
However, wage growth has remained consistent, up 4.3 percent y/y in November (+4.4%y/y in October), with construction (+5.4% y/y), hospitality (+5.2% y/y) and manufacturing (+4.4% y/y) continuing to see wage growth above the national average.
Small Business Index climbs
The New Zealand Small Business Index, part of Xero Small Business Insights, rose three points in November to 117 points, consolidating the strong rebound of 25 points in October. The Index is now at its highest reading since July 2021, prior to New Zealand heading into lockdown restrictions.
“Spurred on by improvements in small business sales across the country, the Index reflects a decent standing for the small business economy as we head into the summer holidays,” says Hudson.
“However, it’s important we continue to support small businesses where we can. It can be a difficult period for businesses as people leave regions en masse for holidays, resulting in reduced income after an already challenging year - especially for businesses in big cities.”
Xero is a cloud-based accounting software platform for small businesses with over 3 million subscribers globally. Through Xero, small business owners and their advisors have access to real-time financial data any time, anywhere and on any device. Xero offers an ecosystem of over 1,000 third-party apps and 300 plus connections to banks and other financial partners. In 2021, Xero was included in the Dow Jones Sustainability Index (DJSI), powered by the S&P Global Corporate Sustainability Assessment. In 2020 and 2021, Xero was included in the Bloomberg Gender-Equality Index and in 2020, Xero was recognized by IDC MarketScape as a leader in its worldwide SaaS and cloud-enabled small business finance and accounting applications vendor assessment.
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