Small businesses record strongest sales growth in three months

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Small business platform Xero has released its latest Xero Small Business Index which provides new data on the health of Australia’s small-business economy for June 2021.

Based on aggregated and anonymised transactions from hundreds of thousands of small businesses, the Index rose 12 points during June 2021 to 144 points In the lead up to restrictions, reaching its highest level since the Index was introduced in January 2017. It also represents the sixth consecutive month of overall above-average performance by small businesses.

The rise in June was largely underpinned by a 2.9-day decline in time to be paid metric, a record low of 20.1 days, and strong sales growth despite stay-at-home restrictions in Melbourne for the first 11 days of June and in Greater Sydney from 25 June.

“Xero’s data reveals Australian small businesses were continuing to show positive signs of recovery at the end of the 2020-21 financial year,” Joseph Lyons, Managing Director Australia and Asia at Xero, said. “This is despite June’s data capturing the bulk of Victoria’s fourth lockdown. The agility and resilience of the small business sector was most evident in the strong growth in sales, hitting a three-month high.

“Recognising the series of significant events that have transpired since June, we will be looking to our July metrics to understand how the return of lockdowns in three states have truly impacted the small business economy’s recovery.”

In terms of industries, healthcare and social assistance (+16.9 per cent) and rental, hiring and real estate services (+14.5 per cent) were the strongest performing industries for June 2021 y/y. Meanwhile, hospitality (+0.3 per cent) and arts and recreation (+1.9 per cent) experienced the lowest sales growth.

Xero also noted that the decline in the length of time small businesses waited to be paid in June is only the second time this measure has fallen below 23 days since the Index was launched in January 2017. Meanwhile, small-business jobs rose 4.3 per cent y/y (adjusted) in June 2021, though it was stunted by the Melbourne lockdown in early June.

Despite a softer national small business jobs increase, this is the fourth month small business jobs was above 4 per cent y/y, an indicator of overall job recovery in 2021. Wages in small businesses, as measured by average employee hourly earnings, rose 3.4 per cent y/y. though still below the pre-pandemic levels.