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The increased cost of living due to inflation has slowed growth but results are still better than one year ago.
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Xero business index falls due to slowing sales and job growth
25 November 2022
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Xero’s small business index fell 13 points in October down to 115 on the back of slowing sales and job growth across the country.
“While the October data is softer than previous months, it’s important to note that the index remains above the long term averages,” said Xero Australia country manager Will Buckley.
“There’s no doubt the rising cost of living — driven by inflationary pressures — is challenging Australians across the country with many consumers being forced to re-examine purchases and reduce discretionary spending.”
“This means customers are left with less to spend at local small businesses. Despite this, it is promising to see that small businesses still have the confidence to bring on new employees.”
After double-digit job growth of 10.2 per cent in September, the index was expected to slow down in October and it dropped to 5.5 per cent.
The result came after five consecutive months of accelerating jobs growth and small businesses still employ more people than one year ago.
Jobs growth in October was led by arts and recreation at 15.7 per cent and hospitality at 11.4 per cent, however, agriculture and construction were the weakest for the month at only 0.3 per cent and 1.7 per cent respectively.
“While the October results reveal a slowdown in jobs growth, these numbers are still well above average,” said Xero economist Louise Southhall.
“On top of this, it’s promising to see arts and recreation and hospitality industries continue to rebound, leading the charge in jobs for the fourth consecutive month.”
Sales growth also slowed in October to just 9.1 per cent year-on-year, almost four percentage points lower than the September result and the weakest result since the beginning of 2021.
“Small business retailers are heading into what is traditionally a busy trading period,” said Mr Buckley.
“As cost of living pressures continue to restrict customers, it will be incredibly important for Australians to shop small this festive season and ensure smaller retailers are better positioned as they head into 2023.”
Wages growth also eased back from its highest point since January 2017 in September of 4.8 per cent to 4.2 per cent in October.
Despite this, the result equalled the second highest month since May 2021, with wages growth still well above the long-term average of 3.0 per cent.
Retail sales growth of 3.5 per cent year-on-year was a strong result compared to New Zealand and the UK.
New Zealand’s retail sales grew 2.7 per cent year on year but the UK’s retailers experienced lower sales than a year ago with growth of -5.1 per cent year-on-year.
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