The index fell three points in November to 116, driven by a slowdown across three of the four sub-metrics; sales grew 7.7 per cent year-on-year (y/y) but were still down from 13.1 per cent y/y in October.
Jobs growth slowed to 2.5 per cent y/y while wages grew 4.1 per cent y/y, down from 4.2 per cent y/y in October.
These results were partially offset by a small improvement in the time to be paid measure, which was 23.3 days in November compared to 23.5 days in October.
Will Buckley, country manager at Xero Australia, said that 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,” he said.
Jobs growth slows after 3 months of gains
Jobs growth slowed to 2.5 per cent y/y in November, which comes after three months of strong gains across the industries.
Arts and recreation saw the largest increase in jobs (+6.5 per cent y/y), followed by administrative services (+4.9 per cent y/y). Agriculture (-1.1 per cent y/y) was the only industry that had a fall in jobs.
Nominal sales rose 7.7 per cent y/y in November, the third consecutive month of slower sales growth. When using the October CPI (+6.9 per cent y/y) as a proxy for prices, the data suggests small businesses are still selling more goods and services than they were a year ago.
Across the industries, sales growth was led by arts and recreation (+15.3 per cent y/y), construction (+12.6 per cent y/y), and education (+12.4 per cent y/y). Finance and insurance (-7.5 per cent y/y), retail trade (-1.1 per cent y/y) and rental, hiring and real estate (-0.1 per cent y/y) recorded a decline in sales.
“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,” said 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.”
November saw a wage rise of 4.1 per cent y/y, continuing a slowing trend following September’s record increase of 4.7 per cent y/y.
“It’s promising to see a slowdown in wages this month, which could suggest Australia is avoiding the price-wage spiral the RBA is seeking to avert by increasing interest rates,” said Ms Southall.
Across the industries, hospitality (+5.2 per cent y/y) and construction (4.8 per cent y/y) recorded the largest increases in wage growth, with healthcare recording the lowest (+3.3 per cent).
“It’s encouraging to see the Australian economy continuing its resilience in the current economic climate,” Mr Buckley said.
“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.”
