New Xero data unveils Canadian small business sales down 5.6% YoY in June

Toronto — October 26, 2023 —Xero, the global small business platform, today announced the latest findings of its Xero Small Business Insights (XSBI) data, shedding light on the current state of small businesses in Canada. In June, sales experienced a 5.6% year-over-year decline, after a 2.6% decline in May and a 2.2% drop in April, marking the most challenging sales period since 2020, when the pandemic forced many small businesses to pivot their operations.

More broadly, the Canadian economy grew 1.1% y/y in the June quarter, lower than expectations. The contrast between June quarter GDP and the latest XSBI sales results suggests that, to date, households have not been favoring small businesses for their spending.

However, there are some promising indicators for the second half of 2023, especially around household finances. Household disposable income rose 2.6% in the June quarter and the household savings rate also improved to 5.1% - above the pre-pandemic level of 2.1%. This suggests households may be starting to rebuild savings amid growing disposable incomes, which could support future sales. August data shows that wages are also now growing faster than prices, signaling an improvement in the purchasing power of pay stubs.

“Canadian households have had a tough 2023 as cost-of-living pressures continue to be top of mind. Unfortunately, the contrast between the still growing GDP result and the XSBI sales data highlights that small businesses are missing out on the modest spending that households are doing,” said Louise Southall, Economist at Xero. “These results are a great reminder about the importance of shopping with local small businesses - something Canadians did so well during the pandemic.”

Encouragingly, against an evolving macroeconomic backdrop, the timeframe that small businesses receive payments remains mostly stable, with some recent improvements. In June, small businesses waited an average of 29.6 days to be paid, and invoices were paid an average of 7.6 days late. These figures are equal to and one day shorter, respectively, than they were in the first five months of 2023, showing a possible stabilizing trend in payment times. However, additional data is needed to know if this is the start of a sustained improvement.

“The June quarter findings have painted a very detailed picture of the current economic conditions small businesses are operating in, spotlighting where the current pressure points are,” said Faye Pang, Xero Canada Country Manager. “While payment time reductions offer some level of optimism, the continued decline of sales demonstrates a shared stress within the sector. We need to continue our support for small businesses at the consumer, industry, and government levels.”

Each quarter, Xero provides small business performance data for Canada and the United States, covering sales, time to be paid, and late payments across tens of thousands of its small business subscribers. The program also releases small business data covering Australia, New Zealand and the United Kingdom. This Xero Small Business Insights data and a free summary update are available to download each quarter at www.xero.com/xerosbi.

ENDS

Media Contact

Xero Canada | Kelly Kerr | capress@xero.com

About Xero

Xero is a global small business platform with 3.7 million subscribers which includes a core accounting solution, payroll, workforce management, expenses and projects. Xero also has an extensive ecosystem of connected apps and connections to banks and other financial institutions helping small businesses access a range of solutions from within Xero’s open platform to help them run their business and manage their finances. For four consecutive years (2020-2023) Xero was included in the Bloomberg Gender-Equality Index. In 2021 and 2022, Xero was included in the Dow Jones Sustainability Index (DJSI), powered by the S&P Global Corporate Sustainability Assessment. Xero is a FIFA Women’s Football partner.

About Xero Small Business Insights

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.

Full details of the methodology can be found here.