The small business economy is continuing to perform, but signs of inflationary pressure are beginning to show.
A small business. File photo Photo:
The accounting software firm Xero's Small Business Index (SBI), which is a broad measure of the performance of small firms, fell six points to 127 points in April.
The result was well above historical averages of 100, and New Zealand's SBI was higher than Australia and the United Kingdom.
Sales growth slowed to 2.9 percent in April as the cost of living pressures and inflation affected consumers, down from 7-percent growth the month earlier.
However, job growth was higher, up 3 percent, an improvement from the 1.9 percent lift in March.
Xero said job growth was led by professional services and manufacturing. It said hospitality and agriculture were the weakest sectors for jobs.
The company's managing director for New Zealand and Pacific Islands, Craig Hudson, said "on paper", small businesses appeared to be performing well, but the early signs of inflationary pressure were there.
"As inflation and the rising cost of living continues to hit the pockets of consumers, we're starting to see this translate into less money available to spend with local small businesses," he said.
"Sales fell in discretionary sectors like hospitality and other services [like hairdressers and beauty salons] and retail."
Hudson said the tightening of the purse for everyday New Zealanders had a direct impact on small businesses, with sales expected to be challenging in a high inflation environment.
"Wages are up once again. This is good, we want to have a high wage economy, but sales need to improve in order to make this wage growth sustainable for New Zealand small businesses.
"It's also important to consider the impact of inflation on real wages - nominal wages less inflation - which are actually falling. In other words, the purchasing power of pay packets actually fell during April, despite the large rise in wages."