Sales for New Zealand's small businesses have dropped but firms managed to add jobs in May despite the ongoing cost of living crisis, a new Xero report suggests.
The Xero Small Business Index dropped to 119 in May - down nine points from the previous month but still above the average score of 100. The index is an expansive measure of how small firms are performing.
But Xero New Zealand business growth director Charlie Nicholls said a 4.1 percent year-on-year increase in job growth last month was encouraging. That increase compared to UK's 5 percent drop.
Nicholls said the job growth showed New Zealand small businesses could successfully compete with larger firms for talent.
"These higher wages are helping small businesses to attract more staff in a very tight labour market."
Data showed small business wages grew 5.3 percent year-on-year last month - the fastest growth since 2017. In Australia, wage growth dropped to 3.7 percent in May from 4.3 percent the previous month.
Businesses in the professional services (9.5 percent), manufacturing (6.7 percent) and construction (5.9 percent) all reported solid job growth.
But hospitality positions were down 6.7 percent - reflecting a lack of international workers, Nicholls said.
Also on the negative side, New Zealand's small business sales activity was down on last month and only 5.7 percent higher than it was a year ago - the smallest rise since September.
"The weakest industry was professional services, where sales actually fell 0.5 percent year-on-year," Nicholls said. "Hospitality sales rose but only 0.6 percent year-on-year, and retail only recorded 2.9 percent year-on-year sales growth."
Hudson said those weaknesses were a result of people changing their spending habits and swaying away from discretionary spending.
As inflation continued to bite, sales would likely remain in the negatives, he said.