Small business optimism fell last month amid high-profile bank failures and ongoing interest rate hikes, according to the National Federation of Independent Business.
The optimism index fell by 0.8 points in March to 90.1, marking the 15th straight month that the reading has been below the 49-year average of 98. A net-negative 47 percent expect better business conditions over the next six months.
According to the NFIB, the continued pessimism is driven by uncertainties caused by the Federal Reserve’s rapid rise in interest rates. The recent failures of Silicon Valley Bank and Signature Bank and the ongoing partisan debt ceiling fight have also limited optimism. Still, consumer demand has buoyed the economy. “While prospects for the economy continue to dim, the widely expected recession has not yet appeared,” the NFIB stated.
Twenty-four percent said inflation is their most pressing business concern, down four points from February. The net percent of owners raising average selling prices fell one point to 37 percent, the lowest since April 2021. A net-negative 6 percent of owners reported higher nominal sales in the past three months. Owners expecting real sales to be higher fell six points from February to a net negative 15 percent.
The labor market remained tight. Forty-three percent of owners had job openings that were hard to fill, down four points from February but still historically high. Twenty-six percent had few qualified applicants for their open positions and 27 percent reported none. A net 42 percent raised compensation, down six points from February. A net 22 percent plan to raise compensation in the next three months.
“Small business owners are cynical about future economic conditions,” said NFIB Chief Economist Bill Dunkelberg. “Hiring plans fell to their lowest level since May 2020, but strong consumer spending has kept Main Street alive and supported strong labor demand.”
Other report findings included:
- The frequency of positive profit trends was a net negative 18 percent, up five points from February.
- Fifty-seven percent made capital outlays in the next six months, down three points from February. Of those, 40 percent spent on new equipment, 23 percent acquired vehicles and 11 percent invested in new fixtures and furniture. Fifteen percent improved or expanded their facilities and six percent acquired new buildings or land to expand.
- Twenty percent are planning capital outlays in the next few months. A net 15 percent plan to create new jobs in the next three months.