Small business optimism grew in June but remained stunted amid stubbornly high inflation and ongoing tightness in the labor market, according to the National Federation of Independent Business.
The NFIB’s Small Business Optimism Index, which increased 1.6 points to 91, has now been below its 49-year average of 98 for 18 straight months. In June, 24 percent of small business owners listed inflation and labor quality as their top small business concerns.
Twenty-nine percent of owners increased their average selling prices, a three-point drop from May and its lowest reading since March 2021. Forty-three percent reported having higher average prices while only 12 percent said they had lowered average selling prices.
The majority of owners (59 percent) reported hiring or trying to hire in June, a drop of four points from the previous month. Of those trying to hire, the vast majority reported few or no qualified applicants. The U.S. job market remains tight with unemployment was at 3.6 percent in June. According to the NFIB survey, 36 percent of owners reported raising compensation, down five points from May. A net 22 percent expect to raise pay in the next three months.
Small business owners expecting better business conditions over the next six months grew 10 points to a net negative 40 percent, 21 percentage points higher than last June’s reading of a net negative 61 percent. The frequency of positive profit trends was a net negative 24 percent, an increase of two points from May as owners cited weaker sales and cost increases. The net percent of owners expecting higher real sales volumes improved seven points to a net negative 14 percent.
“Halfway through the year, small business owners remain very pessimistic about future business conditions and their sales prospects,” said NFIB Chief Economist Bill Dunkelberg. “Inflation and labor shortages continue to be great challenges for small businesses. Owners are still raising selling prices at an inflationary level to try to pass on higher inventory, labor and energy costs.”
Other report findings included:
- Forty-two percent said supply chain challenges had a mild impact on their business, compared with 28 percent who cited a moderate impact and 14 percent who reported being significantly impacted.
- Fifty-three percent of owners made capital outlays in the last six months, down four points from May. Of those, 37 percent spent on new equipment, 21 percent acquired vehicles and 14 percent invested in improving or expanding their facilities.
- A net negative 10 percent of owners reported higher nominal sales in the past three months, down two points from May.