New data released by global small business platform Xero for February points towards small businesses making a gradual recovery, after a challenging summer.
The company’s Xero Small Business Index, which is based on aggregated and anonymised transactions from hundreds of thousands of small businesses, rose three points in February 2022 to 102 points, a result largely driven by sales which rose 15.2 percent year-on-year (y/y), and including a 6.7 per cent increase in hospitality-related sales.
While the result was partially offset by continued weakness in jobs growth, which fell 1.1 percent y/y in February after a 0.6 percent y/y rise in January, the combination of results, overall, means a slow return to above the long-term average and small businesses are optimistic that conditions will be better than previous years.
Hospitality sales rose a solid 6.7 percent y/y as food and accommodation businesses returned to more ‘normal’ trading conditions in the larger east-coast states during the month.
February saw Victoria lead with the strongest sales growth at (+18.2 percent y/y), followed by Western Australia (+17.5 percent y/y) – despite the rise in COVID cases.
Hospitality also recorded a 4.0 percent y/y rise in wages as this sector continues to struggle to attract staff.
Xero Managing Director Australia and Asia, Joseph Lyons, said February’s Xero Small Business Index results are cause for cautious optimism that the sector is on track for a gradual recovery.
That said, small businesses are still navigating the ongoing impacts of the pandemic and continued labour shortages, while also facing a fresh set of challenges in 2022.
“Those in south east Queensland and northern New South Wales are dealing with the aftermath of the floods, while more broadly we’re seeing the effects of inflation and rising costs,” he said.
“Time and again, small businesses have proved their resilience, but they’ll need to remain top of mind for political parties this budget week and as we edge closer to an election. The health of the small business sector is key to our sustained economic growth.”