Small business momentum lost a step in the June quarter. As Dynamic Business reported, Xero's Small Business Insights data shows sales growth easing to 6.5 per cent year-on-year, down from a two-year high of 7.9 per cent in Q1 and below the series average.
The quarter wasn't a smooth glide down. Sales rose 10.7 per cent in April, dropped to 4.0 per cent in May, then recovered to 4.8 per cent in June. Xero economist Louise Southall points to consecutive rate rises and elevated fuel prices taking "the heat out of the economy."
A two-speed picture
The slowdown isn't evenly spread. Hospitality (2.1 per cent), retail (3.4 per cent) and arts and recreation (3.5 per cent) posted the weakest growth, all heavily exposed to discretionary household spending. Mining (14.0 per cent), utilities (13.1 per cent) and construction (10.8 per cent) kept running well ahead.
If you're borrowing, the sector split matters. A lender assessing serviceability reads a hospitality trading history very differently to a construction one right now, and cash flow patterns in discretionary-facing businesses are visibly tighter.
Hiring and cash flow
Jobs growth slowed to 3.0 per cent for the quarter, with June the weakest month of the year at 2.0 per cent. Southall notes hiring is "one of the first decisions small business owners delay when uncertainty rises", a sensible read for anyone modelling headcount against a working-capital facility.
One bright spot: small businesses were paid faster, waiting an average of 22.9 days with late payments improving to 6.0 days. Xero cautions this largely reflects end-of-financial-year patterns, not a lasting shift, so don't build a cash flow forecast on it.
The softening isn't uniquely Australian, the UK sat at 3.6 per cent and the US at 4.0 per cent over the same window. The takeaway for borrowers is boring and correct: stay close to your numbers before you take on more.