The Xero Small Business Index fell to 97 points across December and January, still only slightly below average conditions (100), however Australia and the UK reported much lower scores and this sounded a warning for the situation at home once Omicron peaks.
The index produces a single-figure points score to measure the overall performance of small businesses on the Xero platform, both in New Zealand and overseas. Xero uses data on sales, time to be paid, jobs and wages to track improvements or declines against average conditions (100). You can read more about the data collection process here.
“With Omicron forcing Aotearoa into Red on 23 January, this [latest] data set only captures about a week of the direct impact Omicron was starting to have on the community,” said Craig Hudson, managing director for New Zealand & the Pacific Islands at Xero
As shown in the chart below, Australia and the United Kingdom reported indexes of 86 and 85 respectively as "widespread Omicron outbreaks negatively impacted small business operations" in those countries, reported Xero.
With Omicron cases now at record highs here in NZ, small businesses face disruptions from employee isolation requirements and some face temporary closure.
This could see the index drop further in coming months, with the latest score of 97 a dip after three consecutive months of average scores in the 100s as trading restrictions eased late last year.
“November and December saw double digit sales growth as Auckland emerged from the Delta lockdown, with businesses able to begin reopening, and Kiwis encouraged to spend locally to help small business recovery,” said Hudson.
Hudson said small business sales slowed to 4.6% year-on-year in January once the pent-up demand eased, however wage growth was up 3.8% year-on-year.
Omicron hasn't taken a bite out of job growth either, which remained above average in January at 4.1% year-on-year, in contrast to Australia (-1.5%) and the UK (-3.2%).
The overseas data provides an insight into the effects Omicron may have on NZ small businesses.
“The international data is a warning of potential things to come for New Zealand businesses. The small business economy in Australia was significantly impacted by Omicron earlier in January, with rising cases and required isolation periods resulting in fewer people being able to work,” said Hudson.
Hudson pointed to the advantage New Zealand had in terms of lead-in time to brace for what may be to come:
“Australia and other global markets didn't get the opportunity to prepare for Omicron. We’re in a position to learn from what has happened overseas and be better prepared for the worst of this outbreak.”
9 Comments
Time to stop pretending that it's Omicron affecting businesses, and start blaming the government's response to it.
Poland, Slovakia and Iceland are the latest countries to drop restrictions, with the Icelandic Health Ministry going so far as to say that:
...as many people as possible need to be infected with the virus as the vaccines are not enough, even though they provide good protection against serious illness.
New Zealand's response isn't world-leading, it is world-lagging. We've spent billions of dollars kicking the can down the road, only to have to face the same consequences as everyone else eventually anyway, on top of all the economic and societal damage done by our draconian measures in the mean time.
Even when we do finally start opening up, the fear which has been so actively fomented amongst the general public over the past 2 years will remain. It's going to be hard getting that genie back inside the bottle. People are going to be hesitant to go out and spend even when they've been so graciously allowed to; expect to see a lot more incentives like the Auckland Council vouchers in order to entice people out of their homes and into public spaces.
The UK and its freedoms seems to suggest people aren't necessarily that keen on wading straight into places that are hubs of infection even if they're free to. I don't know why people would find this odd or argue its solely due to sowing of fear - how many people actively chose to be close to others infected with the flu in more typical times?
Also, your argument re the response being world-lagging and having to face the same consequences as everyone else seems to completely miss the fact NZ now faces Omicron with a very well vaccinated population which should see far lower rates of hospitalisation and deaths.
"Facing the same consequences anyway" is not at all like countries that faced rampant COVID without prevalent vaccinations.
If I ran a SME I'd be quite worried about inflation. Larger companies tend to have more pricing power and have advantages in hiring analysts to conduct market research, survey consumers etc. to find an optimum price point as well as HR departments to manage wages.
Not to forget much of those larger companies also have pricing power over their small-medium suppliers and will squeeze every last dime out of the little guy to protect their own margins (think supermarkets and small-scale food manufacturers).
Woolworths stated yesterday that during such times call more consumers switch to homegrown brands (Pams etc.). This puts pressure on suppliers who witness a drop in brand sales and are instead forced to sell their products at bulk prices to supermarket chains.
Went out for breakfast in Christchurch CBD this am. Was as dead as the proverbial dodo; maybe 10% occupancy of tables at the cafe our group attended.
I guess these businesses will be able to use the new relief scheme, but you've got to wonder how many hospitality businesses can really survive this.
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