Small business optimism keeps declining

National small company optimism is still below average, per a significant monthly study.

This is based on the Small Business Optimism Index from the NFIB. It dropped to 91.3 in August, down 0.6 of a point. It’s the twentieth month in a row that the 49-year average of 98 has fallen short, according to a recent article by Mark Gordon of the Business Observer.

Inflation continues to be the primary cause of the downturn in optimism: nearly one-fourth, or 23%, of small business owners stated that inflation was their top concern, which is an increase of two percentage points from the previous month. According to the survey, the percentage of owners who raised average selling prices grew by two points, reaching a seasonally adjusted net 27%, which is still over the inflationary level.

However, nearly one-fourth of respondents—24 percent—state that their biggest business issue is labor quality.

According to a statement from NFIB Chief Economist Bill Dunkelberg, “Owners want to hire and make money now from strong consumer spending, and their views about future sales growth and business conditions are discouraging. Main Street’s biggest challenges remain inflation and labor shortages.”

Additionally, Bill Herrle, executive director of NFIB Florida, stated that “higher prices and a shortage of qualified job candidates are affecting small businesses from the Panhandle to the Keys, and those factors almost certainly will impact the physical recovery along Hurricane Idalia’s path.”

Among the survey’s conclusions are:

Expectations among small business owners for improved business conditions in the upcoming half-year fell by seven points in July, to a net negative 37%. Although it is still at recessionary levels, it is 24 percentage points higher than the net negative 61% reading from last June.

It was difficult to fill employment opportunities, according to four out of ten owners. Although two points less than in July, that is still a record high. It may come as a surprise to learn that owners still have high expectations for filling available positions—a seasonally adjusted net 17% of them intend to add new employment during the next three months.
Owners who anticipate greater real sales dropped from a net positive 14% in July to a net negative 14%.

Up 1% from July, 56% of respondents said they had made capital expenditures in the previous six months. 37% of individuals who made purchases said they bought new machinery, 24% said they bought cars, and 17% said they upgraded or extended their facilities. Three percentage points fewer than in July, nearly one-fourth, or 24%, of owners, plan capital outlays in the upcoming months.

Since the fourth quarter of 1973, the NFIB Research Center has gathered data on Small Business Economic Trends through quarterly surveys and, since 1986, monthly surveys. Participants in the survey are chosen at random from among NFIB members.

The article originally appeared in the Business Observer.