Data influenced by the advance of Easter, payment terms impacted by the end of the year
xerothe global platform for small businesses, today launched its Xero Insights for Small Businesses Data for the March quarter revealed that employment growth remained strong for New Zealand small businesses, while sales made modest improvements to start the year.
Jobs increased 7.0% year-on-year (y/y) in the March quarter, the same result as the December 2023 quarter, and more than double the long-term average (3.0% y/y).
Bridget Snelling, country director at Xero, says strong job growth is a promising sign that small businesses are maintaining hope in uncertain times.
“Small businesses remain eager to attract and retain talent, despite experiencing weaker sales,” Snelling says.
“This is likely a measure to prevent history from repeating itself when sales rise again, as many small businesses were hit by skills shortages during the post-pandemic period in 2021 and 2022.”
Among industries, the highest employment growth occurred in other services (+8.7% year-on-year) and professional services (+7.1% year-on-year), with the manufacturing sector (+4.4% year-on-year) experiencing the lowest growth during this time.
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For the March quarter, Hawke’s Bay (+9.9%) and Northland (+7.8% year-on-year) led employment growth; Both regions were severely affected by Cyclone Gabrielle in early 2023, likely driving these year-over-year results. Manawatu-Whanganui (+5.8% year-on-year) had the smallest increase, but is still well above average long-term employment growth.
Sales improve modestly to start the year: March data is affected by the beginning of Easter
Beyond the March result, which was likely affected by Easter business restrictions, small business sales had a solid start to the year, increasing in January (+2.1% year-on-year) and February (+5. 6% year-on-year).
This shows signs of improvement from the December quarter, when sales fell in December (-0.8% year-on-year) after barely increasing in November (+0.3% year-on-year) or October (+1.1% year-on-year).
This comes as the Consumer’s price index (CPI) rose 4% in the 12 months to the March 2024 quarter, with inflation now at the lowest rate since June 2021, indicating changing conditions of the local economy.
However, sales continue to grow well below the long-term average (+7.0% year-on-year from January 2017 to December 2019). Sales also fell significantly in March (-9.4% year-on-year); and this is probably due to the early Good Friday public holiday, when most businesses were closed and unable to trade.
Across all sectors and regions, sales fell in March, further indicating that data for that month was significantly affected by the Good Friday drop in March for the first time since 2016.
“With the country in a technical recession and New Zealanders cutting back on discretionary spending, our small businesses continue to operate in really difficult conditions,” Snelling says.
“While it is encouraging to see an improvement compared to the end of last year, the truth is that there is still a long way to go until our small business sales reach the long-term average.”
The best performing sector during January and February was other services (+6.8% year-on-year), followed by manufacturing (+3.4% year-on-year) and professional services (+3.4% year-on-year). In contrast to this, agriculture had a drop in sales, -0.9% year-on-year.
By region, sales growth during January and February was led by Hawke’s Bay (+16.3% year-on-year) and Northland (+10.6% year-on-year). Similar to the employment result, this is likely due to very low sales this time last year due to Cyclone Gabrielle. Taranaki (-2.2% year-on-year) was the only region to record a drop in sales during this period.
“A year after Cyclone Gabrielle, it will certainly be a relief to see the affected regions recover in both jobs and sales, demonstrating the resilience of local small businesses in the community,” says Snelling.
Wage growth increases but remains below average
Salaries increased by 3.0% year-on-year in the March 2024 quarter, which is a slight increase compared to the December quarter (+2.8% year-on-year), but still below the result of 4.0% year-on-year recorded in the March 2023 quarter.
The largest wage increases occurred in manufacturing (+3.7% year-on-year) and construction (+3.5% year-on-year), and the smallest continued to be in agriculture (+1.8% year-on-year).
Payment terms affected by EOFY
The time small businesses waited to receive payment after issuing an invoice was 22.9 days in the March quarter, one day faster than in the December quarter. This was due to the result of the month of March, when the payment time was only 20.7 days.
The improvement in payment terms in March is likely due to the end of the financial year, a pattern in the XSBI data that is often seen during the end of the year in all countries analyzed. However, these gains are often reversed the following month, making this drop less pronounced over time.
“While it’s good to see organizations prioritizing paying their small business invoices on time to meet financial year-end deadlines, they need to change course and get into the habit of doing so throughout the calendar year, not just when benefits them.” says Snelling.
“Getting paid on time is crucial to small business operations and plays an important role in helping improve conditions in our small business economy.”
“We need to continue to support small businesses and shop locally where and when we can. “It is also crucial that small businesses turn to advisors for support and draw on the digital tools available.”
The recent XSBI Special Report on Small Business Labor Productivity highlighted the benefits that digital adoption can offer small businesses, helping them compete more effectively with larger companies and enabling them to generate higher profits, pay higher wages to staff and reduce prices for employees. customers.
For more information on XSBI’s March quarter metrics, see the XSBI New Zealand update. For more information on how XSBI is built, see the methodology.
[1]
Other services include a range of personal services such as hairdressing, beauty, funerals and religious services.
[2]
The impact of Easter varies from industry to industry. Hospitality and tourism businesses can get a boost during this holiday period. But most businesses lost one day of trading (Good Friday) in March when they would normally be open. There is a historical pattern in the XSBI data that fewer invoices are issued in the month in which Easter falls. This can result in a very weak sales growth result if the Easter date falls in April of one year but March of the next.
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