New data shows that the growth of small business sales in Australia has slowed down. In November, small business sales increased 7.7 per cent year-on-year, compared to 13.1 per cent in October.
This decline suggests that small businesses in Australia are facing challenges and may need to adapt in order to continue growing.
It is worth noting that this slowdown in sales growth follows a warning from the Reserve Bank of Australia for consumers to cut back on spending and the increasing interest rates, which may have affected shoppers’ willingness to spend.
These factors may have contributed to the slowdown in small business sales growth. The Index’s total score fell three points in November to 116. This decline was caused by a slowing of three of the four sub-metrics.
Jobs growth slows
Job growth in various industries had been strong over the previous three months, but this trend slowed in November. According to data, the administrative services industry experienced the second-fastest employment growth at 4.9 per cent, followed by arts and recreation at 6.5 per cent.
Surprisingly, the agriculture industry was the only one to see a decrease in employment, with a 1.1 per cent growth rate. These findings indicate that while the job market has been performing well overall, some areas are still struggling.
Sales continue to slow
According to recent data, small firms’ nominal sales in Australia increased by 7.7 per cent year on year in November, the third month in a row of slower sales growth. Despite slowing growth, small businesses are still selling more goods and services than they were a year ago, according to the October Consumer Price Index, which showed a 6.9 per cent year-over-year increase.
“Retail trade sales declined for the first time since April 2020, which suggests increased cost of living pressures, including interest rate rises, have started to impact household spending despite the major sales events in November, such as Black Friday and Cyber Monday,” says Louise Southall, Xero Economist.
“However, on a global scale, Australia is the only country tracked by the Index that has been able to maintain positive sales volume growth so far during 2022.”
With a 15.3 per cent year-over-year increase, arts and recreation led all other industries in revenue growth. Construction and education came in second and third, with year-over-year increases of 12.6 per cent and 12.4 per cent, respectively.
However, sales fell in several sectors. These sectors included banking and insurance, which fell 7.5 per cent yearly, and retail trade and rental, hiring, and real estate, which fell 1.1 per cent and 0.1 per cent, respectively. These findings suggest that while some industries are doing well, others may need to adapt to continue growing.
Will Buckley, Country Manager, Xero Australia, said: “The November data has revealed consecutive months of a slowdown across sales, jobs and wages.
“While these figures may be unsettling for small business owners, it’s important to note that the indicators are still demonstrating a growing economy, but at a slower pace, which is in line with the Reserve Bank forecast as it works to control inflation and avoid recession.
“The reduction in wage growth will be a small but welcome relief for small business owners as they continue to balance a tight labour market with rising costs.
“As summer festivals and events kick off around the nation, it’s promising to see the arts and recreation sector continue to rebound – leading the charge in jobs for the fifth consecutive month,” says Buckley.
Wages continue to rise
According to recent data, wage growth in Australia slowed even further in November, increasing by only 4.1 per cent year on year. This follows September’s record growth of 4.7 per cent year on year.
Experts believe Australia is on the verge of escaping the “price-wage spiral” that the Reserve Bank of Australia is attempting to avoid by raising interest rates due to a slowing in pay growth.
The hotel and construction industries saw the highest annual wage growth, with 5.2 per cent and 4.8 per cent annual increases, respectively. The healthcare sector had the lowest year-over-year salary growth, at 3.3 per cent. These findings show that while overall wage growth is slowing, wage growth in some industries remains strong.
“It’s encouraging to see the Australian economy continuing its resilience in the current economic climate. However, with sales numbers softening, I would encourage any small business that is starting to feel the pinch to speak to an advisor sooner rather than later and come up with a plan to navigate the months ahead,” concluded Buckley.
Go to the Xero Small Business Insights website to download the full November results, including industry and regional breakdowns.