Small businesses’ optimism fell in December as owners continued to view inflation as the top threat to their operations, according to the National Federation of Independent Business.
The index for small business optimism fell 2.1 points last month to 89.8, the 12th straight month that it has fallen below the 49-year average of 98. Owners anticipating better business conditions over the next six months fell by eight points from November to a net-negative 51 percent. Thirty-two percent of owners said inflation is the top problem they face in running their business. A net percentage of 44 percent said they had raised compensation.
The labor market remained tight as owners tried to add positions. Forty-one percent of owners had job openings that were tough to fill, down three points from November but still historically high.Twenty-three percent said that labor quality was their top business problem. Still, 55 percent of owners said they either hired or tried to hire employees in December. A seasonally adjusted net 17 percent planned to create new jobs in the next three months.
The frequency of positive profit trend reports was a net negative 30 percent, down eight points from November, as owners cited higher costs of materials, weaker sales numbers, labor costs and other factors. Twenty-three percent of owners said that supply chain disruptions have had a significant impact on their business. Thirty-two percent reported a mild impact and 30 percent reported a moderate impact.
A net negative 8 percent of owners had higher nominal sales in the past three months, down one point from November. The net percent of owners expecting higher real sales volumes fell two points to a net negative 10 percent while the net percent of owners increasing their average selling prices fell eight points to 43 percent.
Fifty-five percent of owners said they had made capital outlays in the last six months. Of those, 37 percent spent on new equipment, 22 percent acquired vehicles and 12 percent invested in new fixtures and furniture. Twenty-three percent of owners reportedly plan capital outlays in the next six months.
“Overall, small business owners are not optimistic about 2023 as sales and business conditions are expected to deteriorate,” said NFIB Chief Economist Bill Dunkelberg. “Owners are managing several economic uncertainties and persistent inflation and they continue to make business and operational changes to compensate.”