NZ small firms see strongest sales growth in three years

New Zealand small businesses recorded their strongest sales growth in three years in the December quarter, new Xero data shows, as end-of-year spending lifted trading conditions and payment times improved.

Xero's Small Business Insights dataset, based on 144,000 small businesses, showed sales rose 4.8% year on year in the December quarter, up from 2.8% in the September quarter.

Growth was sharper in December alone, with sales up 9.8% year on year for the month, above the dataset's long-term average of 6.2%.

Xero Aotearoa New Zealand country manager Bridget Snelling said the result suggested conditions may be improving after a weak period.

"This is the clearest evidence we've seen in several years that momentum is starting to return," Snelling said. "Sales growth in the December quarter was the best result in three years, and the strong finish to 2025 suggests confidence is slowly rebuilding among small business owners."

She linked the stronger sales performance to interest rate settings, saying lower borrowing costs were starting to show up in the data.

"Lower borrowing costs are starting to flow through the economy," Snelling said. "That's easing pressure on households and businesses alike, and thankfully we're starting to see those changes show up in small business sales."

In a trans-Tasman comparison for December, New Zealand slightly outpaced Australia, with sales up 9.8% year on year versus 9.6%.

Sector split

The improvement was uneven across the economy. Professional services led the December quarter, with sales up 8.6% year on year, and a near-record 18.5% rise in December.

Real estate and manufacturing also posted gains, with sales up 6.5% and 5.2% respectively.

Retail trade sales rose 4.5% year on year in the quarter, up from 3.9% in September.

Hospitality continued to lag, with sales up 0.5% year on year in the December quarter, little changed from the previous quarter.

"Not every sector is feeling the recovery at the same pace. Professional services and manufacturing are showing strong momentum, while hospitality remains under pressure as consumers continue to be cautious with discretionary spending," Snelling said.

Regional picture

Results continued to favour the South Island. Canterbury recorded 8.0% year-on-year sales growth in the December quarter, followed by Otago at 6.2%.

Both outperformed the country's two largest city economies. Auckland grew 4.4% in the quarter, while Wellington rose 3.7%.

Bay of Plenty also had a stronger quarter, with sales up 6.3% year on year. Xero said it was the region's strongest result since the September quarter of 2022.

Payments improve

The data also pointed to better cash-flow conditions at the end of the year. Xero reported small businesses were paid an average of 4.5 days late in the December quarter, the lowest level since the series began in 2017.

The average time between issuing an invoice and being paid also edged down, to 24.8 days in the December quarter from 25.2 days in September. Across 2025, Xero said payment times were largely unchanged from 2024.

Snelling said faster payments matter for smaller firms that often operate with tighter cash buffers, but noted late payments remain a problem despite the improvement.

"Shorter payment times are a positive development for small business cash flow," she said. "However, businesses are still being paid late on average, which shows there is more work to do to improve payment practices across the economy."

The December quarter results add to a broader picture of easing pressure, but conditions remain uneven by sector and region. Hospitality's weak result contrasted with stronger growth in professional services and manufacturing, while Wellington trailed other regions tracked in the dataset.

"The recovery isn't complete, and pressures remain for many business owners. But the improvement we're seeing at the end of 2025 shows that easing financial conditions are beginning to make a real difference," Snelling said. "If this trend continues, 2026 has the potential to be a year of gradual, but meaningful recovery for small businesses across New Zealand."