Strong NZ Small Business Results In April As Inflationary Pressure Looms
Sales growth declines as Kiwis grapple with rising cost of living.
Wages rose 4.8 percent year-on-year (y/y) in April, after a 4.4 percent y/y rise in March. The wages growth has clearly stepped up in the past three months - averaging 4.4 percent compared to 3.9 percent y/y in the previous three-month period.
Jobs grew 3.0 percent y/y in April, up from a 1.9 percent y/y rise in March. This was led by strong results in professional services (+8.4% y/y) and manufacturing (+5.6% y/y). Hospitality (-8.9% y/y) and agriculture (-2.8% y/y) remain the weakest sectors for jobs.
Small business sales growth slowed to 2.9 percent y/y in April, coming down from 7 percent y/y in March 2022.
Xero’s Managing Director for New Zealand & Pacific Islands, Craig Hudson, says rising inflation and the increasing cost of living are beginning to impact the discretionary spending of everyday Kiwis.
“As inflation and the rising cost of living continues to hit the pockets of consumers, we’re starting to see this translate into less money available to spend with local small businesses,” says Hudson.
“Sales fell in discretionary sectors like hospitality (-2.4% y/y), other services [like hairdressers and beauty salons] (-0.6% y/y) and retail (-0.2% y/y).
“This tightening of the purse for everyday Kiwis has a direct impact on how the small business economy fares, which we anticipate will remain a challenge for small business sales in the coming months as inflation continues to climb.
“Wages are up once again. This is good, we want to have a high wage economy, but sales need to improve in order to make this wage growth sustainable for New Zealand small businesses.
“It’s also important to consider the impact of inflation on real wages - nominal wages less inflation - which are actually falling. In other words, the purchasing power of pay packets actually fell during April, despite the large rise in wages.”
The New Zealand Consumer Price Index (CPI) rose 6.9 percent y/y in the March quarter. Using this latest available CPI data means real wages actually fell 2.1 percent y/y.
“It’s good to see the 3.0 percent job growth. It shows Kiwi small businesses are able to attract workers at the moment,” says Hudson.
“However, we do need to be wary of the talent we may soon lose with the border opening. MBIE is anticipating 50,000 New Zealanders will head overseas and many of these will come from small businesses.”
Small Business Index remains strong
The New Zealand Small Business Index fell six points to 127 points in April. This came after a large 18 point rise in March 2022.
Despite the decline, this result remains around historical highs at the fourth highest reading on record, and the overall performance of small businesses in New Zealand remains well above average for April.
“On paper, the small business economy appears to be performing well. But the early signs of inflationary pressure are beginning to show,” says Hudson.
“The next few months are likely to be a challenge for small business owners and everyday Kiwis alike. Where possible, we would encourage Kiwis to buy local and support small businesses in their community to help weather the economic challenges facing the nation.
“If our money is circulating locally in the New Zealand economy by supporting local business, this will help us all through the potentially difficult times ahead.”
For further information on the Xero Small Business Insights April 2022 metrics, please refer to the XSBI New Zealand update.
Xero is a global small business platform with 3.3 million subscribers which includes a core accounting solution, payroll, workforce management, expenses and projects. Xero also provides access to financial services, and an ecosystem of more than 1,000 connected apps and more than 300 connections to banks and other financial institutions. Through Xero’s open platform, small businesses can connect to a range of solutions that help them run their business and manage their finances. For three consecutive years (2020-2022) Xero was included in the Bloomberg Gender-Equality Index. In 2021, Xero was included in the Dow Jones Sustainability Index (DJSI), powered by the S&P Global Corporate Sustainability Assessment. Xero has been named as a FIFA Women’s Football partner under FIFA’s new commercial structure.
Accenture worked in collaboration with Xero on the design and methodology of the Index prior to February 2022.
Accenture is a leading global professional services company, providing a broad range of services and solutions in strategy, consulting, digital, technology and operations. Combining unmatched experience and specialised skills across more than 40 industries and all business functions — underpinned by the world’s largest delivery network — Accenture works at the intersection of business and technology to help clients improve their performance and create sustainable value for their stakeholders.
Media Contact Amelia Lewis, Xero Communications
021 163 8852