Overall sales were largely flat last month with agriculture, retail trade and professional services recording the largest year-on-year declines. Photo: 123rf
Small business sales have fallen to their weakest levels since September 2021 as high inflation continues to curb consumer spending, a new report shows.
The Xero Small Business Index fell to 105 points in January, down 38 points from November but still above the benchmark average of 100.
Overall sales were largely flat last month with agriculture, retail trade and professional services recording the largest year-on-year declines.
Xero country manager Bridget Snelling said sales, wages and jobs growth all slowed in January and there was a slight uptick in the time it took for businesses to be paid.
In reality, most small businesses were falling behind, Snelling said.
"The falling sales numbers are worse when you factor in inflation," she said.
"Using the CPI as a proxy for prices means the average Kiwi small business is currently operating with their sales volume down 7.2 percent.
"This paints a difficult picture for small businesses when they are managing those downturn sales with increased expenses and an uncertain economic outlook."
Small businesses would need to think carefully about what practices would put them in the best position to weather any economic storms heading their way, Snelling said.
"Now's a really good time to review your suppliers and see if there is a local Kiwi business you could consider," she said.
"For consumers, as always, make sure you pay your invoices on time and for small business owners, chase up your invoices if they haven't been paid and try and improve that cash flow situation."
Snelling advised business owners to look at digital tools that could save time and money and to get in touch with an adviser to draw up a roadmap for the year ahead.
Hospitality was an outlier in the data, with sales up 16.2 percent as the sector continued its recovery from the Covid-19 lockdowns, she said.
"Continuing the ongoing recovery story, hospitality saw the largest increase in jobs in January (+7.6 percent year-on-year), followed by professional services (+6.5 percent year-on-year).
"We know it's likely to be a challenging year for many, but it remains important for Kiwi consumers to buy locally where possible to help support Aotearoa's small business community through 2023."
Wage growth eased alongside spending across all sectors but was still above the long-term average, Snelling said.
"This slowdown in the New Year will likely be a welcome reprieve for many small business owners who are juggling their operating costs with downturned sales," she said.
The latest data means New Zealand's small business economic performance was currently close to average.
