Small business owner sentiments fall to 11-year low

Small business optimism fell to its lowest reading in more than a decade last month as inflation continues to stymie confidence, according to the National Federation of Independent Business

The NFIB Small Business Optimism Index fell by 0.9 last month to 88.5, its lowest mark since December 2012. The index has been below the 50-year average of 98 for 27 straight months.

Twenty-five percent of owners said inflation was their most important problem in operating their business, up two points from February. Eighteen percent cited labor quality as their top small business operating problem.

Inflation increased 3.2 percent on an annualized basis and 0.4 percent in February, according to the Bureau of Labor Statistics. Federal Reserve officials have signaled interest rate cuts are unlikely until the second half of this year as the economy remains strong and unemployment is low at 3.8 percent.  

“Small business optimism has reached the lowest level since 2012 as owners continue to manage numerous economic headwinds,” said NFIB Chief Economist Bill Dunkelberg. “Inflation has once again been reported as the top business problem on Main Street and the labor market has only eased slightly.”

A net 28 percent of owners raised average selling prices in March, up seven points from February. A net negative 18 percent expect real sales to be higher in March, down eight points from the previous month. A net negative 10 percent of owners saw higher nominal sales in the past three months, a three-point increase from February. 

The frequency of positive profit trends was a net negative 29 percent, up two points from February, as owners cited weaker sales, rising materials costs, seasonal changes and price changes.  

Thirty-seven percent of owners had job openings they could not fill. A net 21 percent expect to raise compensation in the next three months, up two points from February. A net 11 percent plan to create new jobs in the next three months, down one point from February and its lowest mark since May 2020. A net 38 percent raised compensation, up three points from February’s nearly three-year low. 

Other report findings included: 

  • Fifty-six percent reported capital outlays in the last six months, up two points from February. Of those, 38 percent spent on new equipment, 24 percent acquired vehicles and 17 percent improved or expanded facilities.

Owners seeing inventory gains fell six points to a net negative 7 percent.