Xero Small Business Index: Hardest hit sectors bouncing back

Small and medium hospitality businesses experienced their strongest month for sales since the Covid-19 pandemic hit last year. Photo / 123RF

Buoyed by the transtasman bubble, sales in New Zealand’s small business hospitality sector are strongest in over a year, new data has revealed.

Insights from Xero's Small Business Index (XSBI) for May 2021, released today, show improvements in both sales and jobs figures for the country's small and medium-sized firms.

The index – which typically compares year-on-year data – was adjusted using annualised two-year growth to account for data from May 2020 being significantly impacted by Covid-19.

Small business sales across New Zealand grew 6.2 per cent year-on-year in May 2021, with businesses being paid almost half a day faster.

The hospitality sector experienced its strongest month for sales since the Covid-19 pandemic hit New Zealand last year.

Hospitality sales rose an adjusted 7.5 per cent in May compared to the 4.2 per cent rise last month.

Retail trade experienced the strongest performance, with sales up 8.8 per cent year-on-year, followed by construction (+7.6 per cent).

Craig Hudson, Xero's managing director for New Zealand & Pacific Islands, said the hospitality industry has started to see an upswing after months of negative results.

"The effects of the transtasman bubble, for example, seem to be infusing the local retail, tourism and hospitality sectors with increased sales," Hudson said.

"We hope to see these trends continue as the small business sector stabilises and returns to the consistent growth we saw before the pandemic struck."

Jobs growth continued to head in the right direction, rising 4.7 per cent in May compared with last month, though it remained down 1 per cent year-on-year overall for May.

The strongest jobs growth results regionally were in Northland (+7.1 per cent), followed by Waikato (+6.1 per cent), Hawke's Bay and Canterbury (both +5.7 per cent).

"Together this is the most positive month for the sector since the first Covid-19 lockdown in April last year," Hudson said.

"While it's looking promising, small businesses in the hospitality sector have a long way to go to get back to pre-pandemic levels of growth and still face many challenges, including those around labour shortages. They are still in desperate need of support right across the country."

Xero's Small Business Index remained above 100 points for the fourth consecutive month, signalling stronger than average small business activity.

However, the XSBI fell 14 points to 109 points in May compared with last month, but remains well above its all-time low of 18 last April.

The index sat at 50 points in May 2020, but has since only been below 100 (or average) in four months since - including once in 2021 (January).

"It's encouraging to see the Small Business Index remain high for the majority of 2021. As we continue to recover from the impact of Covid-19, we need to remain supportive of the local small business economy," Hudson said.

Xero's Small Business Index draws on data from hundreds of thousands of businesses to provide a picture of business conditions.