Small business optimism grows

Small businesses’ optimism increased in November but remained below average as rising interest rates, inflation and worker shortages continued to pose problems to their companies, according to the National Federation of Independent Business

The index for small business optimism increased by 0.6 points in November to 91.9, the 11th straight month of the reading falling below the 49-year average of 98. Thirty-two percent of owners said inflation is the top problem they face in running their business, five points lower than July’s record-high reading.

 Fifty-one percent of owners reported raising their average selling prices, which is historically high but still lower than earlier in 2022. The frequency of positive profit trend reports was a net negative 22 percent as small firms cited the rise in materials costs, weaker sales, labor costs, and other factors for reduced profits. 

Twenty-nine percent said that supply chain disruptions had “a significant impact” on their operations. Thirty-four percent reported a “moderate impact”, and 26 percent said shortages had a “mild impact.” The net percent of owners who expect real sales to be higher over the next six months increased five points from October to a still-weak net negative 8 percent.

 Fifty-five percent of owners reported making capital outlays in the last six months, a slight increase from October. Of those, 39 percent spent on new equipment, 19 percent purchased vehicles and 12 percent improved or expanded facilities. Twenty-four percent plan capital outlays in the next few months. 

The share of owners expecting better business conditions over the next six months increased by three points to a net negative 43 percent in November, which still indicates recessionary expectations, according to the NFIB. 

Despite recessionary fears, the report also included positive economic indicators. According to the NFIB, consumer spending remained strong last month. Job creation, though lower than a year ago, remained solid as the labor force participation rate fell. Forty-four percent of owners reported having job openings that were hard to fill, down two points from October. A net 18 percent of small businesses owners planned to create new jobs in the next three months.  

“Going into the holiday season, small business owners are seeing a slight ease in inflation pressures, but prices remain high,” said NFIB Chief Economist Bill Dunkelberg. “The small business economy is recovering as owners manage an ongoing labor shortage, supply chain disruptions and historic inflation.”