Xero Data Shows U.S. Small Business Sales Lose Momentum as Household Pressures Weigh on Main Street

San Mateo, California – November 12, 2026 – The latest Xero Small Business Insights (XSBI) update, covering the September quarter 2026, shows U.S. small business sales growth slowed nationally to 4.3% year over year (y/y), down from 5.9% during the June quarter and below the 5.4% long-term average.

Momentum weakened throughout the quarter, with sales growth easing from 5.5% y/y in July to 4.9% y/y in August and 2.5% y/y in September. The slowdown likely reflects continued pressure on household budgets from elevated gasoline prices, persistent inflation and rising borrowing costs.

“AI-related infrastructure investment is supporting headline economic growth, but those benefits are not flowing evenly through the economy,” said Louise Southall, economist at Xero. “Most small businesses are more directly exposed to household spending, where elevated gasoline prices, persistent inflation and higher borrowing costs are limiting demand. That helps explain why solid national indicators can coexist with slowing sales growth on Main Street.”

State results reveal a sharply divided small business economy

Based on aggregated and anonymized data from 32,000 U.S. small businesses, the latest XSBI report shows that the national result masked significant differences across 18 state and regional groupings.

Tennessee recorded the strongest sales growth at 10.7% y/y, followed by Delaware and North Carolina at 9.3% y/y each. In contrast, sales declined 0.8% y/y in Florida, 0.5% y/y in Pennsylvania and 0.1% y/y in Washington. Utah recorded the largest improvement, shifting from a 2.6% y/y decline in the June quarter to 4.5% y/y growth in the September quarter.

Payment times also varied considerably, ranging from 24 days in Florida and 25.6 days in California to 36.8 days in Texas and 36.5 days in Illinois.

“The national result does not fully capture what individual small businesses are experiencing,” Southall said. “Some states continue to record strong growth, while businesses elsewhere are operating in much more challenging conditions. That regional context is critical to understanding the overall and wide-ranging health of the small business economy.”

Payment conditions remain stable, but September provides a warning sign

Payment conditions remained broadly stable at the quarterly level, suggesting that slower sales growth has not yet translated into a material deterioration in cash flow. Small businesses waited an average of 29.7 days to be paid during the September quarter, compared with 29.3 days in the June quarter. Payments arrived an average of 8.6 days late, largely unchanged from 8.5 days in the previous quarter.

However, the average time to be paid reached 30 days in September, the longest since March 2024. U.S. small businesses also continued to experience the second-longest late-payment times among the five countries tracked by XSBI, behind only Canada.

“Stable payment times should not be mistaken for an easy cash flow environment,” said Matan Bar, US CEO of Xero. “When sales growth is slowing and payments are still arriving more than a week late, small businesses have less flexibility to manage expenses, invest in growth or respond to unexpected challenges. Greater visibility into when money is coming in and going out can help owners and their advisors identify pressure earlier and make more informed decisions.”Higher borrowing costs and uncertainty cloud the outlook

The September-quarter data does not yet fully reflect the impact of the Federal Reserve’s September rate increase or continued upward pressure on long-term bond yields. Both can increase debt repayments for households and businesses, leaving consumers with less to spend and putting additional pressure on small business margins.

The latest National Federation of Independent Business Small Business Economic Trends report reinforces this cautious outlook. Its Optimism Index declined to 97.9 in September, while the Uncertainty Index rose to 90, well above its historical average of 68, amid increased concerns about business expansion and investment.

“The stability in payment times provides some reassurance and gives small businesses an opportunity to prepare for the months ahead,” Bar said. “By closely monitoring cash flow, planning for different demand scenarios and working with trusted advisors, owners can identify pressure early and make informed decisions while conditions remain manageable.”

To access the latest data, visit the XSBI website.

Media Contact:

Xero US

Diandra Binney

diandra.binney@xero.com

About Xero

Xero is a global small business platform and a trusted financial operating system for the AI era. Xero’s purpose is to make life better for people in small business, their advisors, and communities around the world. By unifying core financial operations (including accounting, payroll and payments) underpinned by insights and a robust ecosystem into autonomous workflows, we empower 5 million small businesses and accountants and bookkeepers across 180+ countries to move from managing records to making informed decisions. 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 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, Xero publishes regular blogs, research notes and special reports covering small business trends. These can be found at xero.com/xerosbi.