Small business owner optimism increased last month but remained lower than average amid stubbornly high inflation, according to the National Federation of Independent Business.
The NFIB Small Business Optimism Index increased 0.8 points to 90.5 in May, its 29th straight month of being below the long-term average of 98. Twenty-two percent of owners cited inflation as their No. 1 problem in operating their business, unchanged from April and still their top problem in operating their business. Twenty percent said labor quality was their top business problem.
“Small business owners have expressed historically low optimism and their views about future business conditions are at the worst levels seen in 50 years,” said NFIB Chief Economist Bill Dunkelberg. “Small business owners need relief as inflation has not eased much on Main Street.”
The index for uncertainty increased nine points to 85, its highest reading since November 2020. Owners’ plans to hire increased three points to a seasonally adjusted net 15 percent, its highest reading of the year, even as 42 percent reported job openings they could not fill in the current period. Eighteen percent expected to raise compensation in the next three months, down three points from April and its lowest reading since 2021.
A net negative 14 percent of owners reported higher nominal sales in the past three months, while the net percent of owners expecting higher sales volumes fell one point to a net negative 13 percent. The frequency of positive profit trend reports was a net negative 30 percent, down three points from April, as owners cited lower sales, rising material and labor costs and selling prices.
Other report findings included:
- Twenty-eight percent planned price hikes in May, up two points from April. A net negative 8 percent of owners said current inventory stocks were too low, down four points from April and its lowest reading since 1981.
- Six percent cited financing as their top business problem in May, up two points from April and its highest reading in 14 years.
- Fifty-eight percent reported capital outlays in the last six months, up two points from April. Of those, 40 percent spent on new equipment, 25 percent acquired vehicles and 16 percent improved or expanded facilities. Twenty-three percent plan capital outlays in the next six months.
