Last week Xero released the results of its latest small business index, which rose to 7 points to 132 for the month of May, the highest levels ever recorded since the index was established in January 2017.
Data shows that small businesses have emerged from a fifth consecutive month of overall above-average performance, driven by job gains, wage increases and the narrowing of payment waiting times.
Jobs growth across the sector remained above 5 per cent for the second month in a row, compared with the same period last year.
All industries tracked by the index — which comprises anonymous transactions executed by its users — recorded positive jobs growth, even those which have struggled through the pandemic, like the hospitality and arts and recreation industries, which posted increases of 3.3 per cent and 4.5 per cent on the same period last year, respectively.
As far as sales go, the sector overall is up by 6.3 per cent compared with May last year, led by strong performances in healthcare, which recorded a 12.8 per cent boost, and retail, which posted a sales increase of 10.7 per cent.
Xero managing director in Australia and Asia Trent Innes said the latest round of data highlights just how strong a contribution the small business sector is making to Australia’s economic recovery.
It’s pleasing that some of the hardest-hit businesses, like those in hospitality and retail, are now adding to this recovery, as we begin to see an uptick in jobs and sales across these industries,” Mr Innes said. “The figures are a stark comparison to the same period last year.”
The figures also show payment times for May narrowing by 0.5 days to 22.9 days compared with the same period for last year. According to the report, it’s just the second time the metric has fallen below a 23-day average since the report’s inception.
Late payments, too, fell by 0.4 days to 6.3 days — 3.6 days faster than it was at the height of the pandemic. It does mean, though, that businesses are still being paid up to one week late, on average.
The index also points to good news for wage growth in the small business sector. Average hourly earnings for the month rose by 3.8 percentage points, compared with the same period last year. Adjusted for the low result posted last year, the wage increase was 2.7 per cent, still marginally stronger than April’s 2.4 per cent.
Mr Innes warned that this data set isn’t likely to reflect the impacts of Victoria’s fourth lockdown, which shuttered the state from late May and continued into early June.
“The most recent Victorian lockdown has been challenging for our small business sector, with some industries having to shut their doors once more due to the restrictions,” Mr Innes said.
“While we may see a drop in Victorian small business jobs and sales in next month’s index update, previous Xero Small Business Insights analysis has shown how resilient our small business community is.
“We’ll be looking to our June 2021 metrics to see the full extent of the lockdown on Victorian small businesses.”