Small businesses have had their best month since last year's level 4 lockdown, but face a significant challenge from labour shortages.
Xero's Wellington office. Photo: Supplied.
Accounting software firm Xero's small business index rose sharply in June, up 17 points to a record high of 127.
A reading above 100 suggests small firms are performing better than average.
The rise was driven by strong growth in the firm's sales, jobs and employees' wages which were up 11.7 percent, 3.7 percent and 5 percent respectively.
The index typically compares data on a year-on-year basis but given that the economy was still moving out of the first lockdown 12 months ago, the comparisons were made using information from 2019.
Xero managing director for New Zealand Craig Hudson said June was the strongest month for the small business economy since the first lockdown.
"Driven by the strong sales and job growth figures recorded in June, seeing the Small Business Index reach new heights is an encouraging sign that New Zealand's small business economy is heading in the right direction," he said.
"If we stay on this trajectory and continue to support Kiwi small businesses by shopping locally, we're well on our way to reaching - and even outperforming - pre-pandemic growth."
Across different sectors, sales in retail and manufacturing businesses were the stand out performers, while the hospitality industry saw sales increase by just over 10 percent.
"Despite the strong sales result seen in the hospitality sector, a lack of job growth in the industry points to chronic labour shortages across the country," Hudson said.
Northland and the Waikato regions added the most jobs over the month, while the Bay of Plenty and Otago experienced the slowest annual growth in jobs.