Small business owner optimism is improving but remains below average as inflation continues to be a top challenge, according to the National Federation of Independent Business.
The index tracking optimism increased 2.2 points last month to 93.7, its 34th straight month of being below the 50-year average of 98. The index for uncertainty increased seven points to a record 110. A net negative 20 percent of small business owners saw higher sales when accounting for both price and volume changes, its lowest reading since the summer of 2020.
Inflation remained the top issue for small business owners as 23 percent cited it as their No. 1 problem in operating their business. September’s Consumer Price Index increased 2.4 percent on an annual basis, down from 2.5 percent in August. A net 21 percent of owners raised their average selling prices in October, down one point from the previous month. Thirty-two percent saw higher average selling prices, compared with only 13 percent who reported lower average prices.
Small business owner uncertainty will ease following the Nov. 5 elections, said NFIB Chief Economist Bill Dunkelberg. “Although optimism is on the rise on Main Street, small business owners are still facing unprecedented economic adversity,” he said. “Low sales, unfilled job openings, and ongoing inflationary pressures continue to challenge our Main Streets, but owners remain hopeful as they head toward the holiday season.”
A net 31 percent of small businesses raised compensation, down one point from September and its lowest mark in 3 1/2 years. A net 23 percent expect to raise their compensation in the next three months, unchanged from September. Twenty percent cited labor quality as their No. 1 business problem. Eight percent reported labor costs as their top business problem, down one point from September.
Thirty-five percent of owners had job openings they could not fill in the current period, up one point from September. Eighty-seven percent of those trying to hire reported having few or no qualified applicants.
The frequency of positive profit trend reports was a net negative 33 percent, up one point from September, as owners cited weaker sales, rising materials and labor expenses along with lower selling prices. Owners anticipating higher sales volumes increased five points to a net negative 4 percent, its highest reading of the year. A net 5 percent of owners paid a higher rate on their most recent loan, down seven points from September and its lowest reading since the start of 2022.
Other report findings included:
- Fifty-four percent of owners made capital outlays in the last six months, up three points from September. Of those, 35 percent invested in new equipment, 23 percent purchased vehicles and 14 percent renovated or expanded facilities.
- A net negative 9 percent of owners reported inventory gains, up four points from September. Ten percent reported stock increases and 18 percent experienced reductions.