Small Business Owners Remain Concerned about Future Business Conditions

The latest NFIB Small Business Optimism Index shows a small increase of 0.4 points in May, taking the index to 89.4. However, this is still the 17th consecutive month the index has been below the 49-year average of 98, with the last time the index at or above average in December 2021. Of particular concern is that small business owners expecting better business conditions over the next six months have declined one point from April to a net negative 50%.

NFIB Chief Economist, Bill Dunkelberg, said, “Overall, small business owners are expressing concerns for future business conditions.” He pointed out that issues like supply chain disruptions and labor shortages will continue to impact many small firms’ ability to meet demand, albeit less severely than last year’s experience.

Key findings of the report include a decrease in job openings hard to fill, down one point from April to 44%, although this remains historically high. The net percent of owners raising average selling prices decreased one point to a net 32% (seasonally adjusted), still at an inflationary level but showing a downward trend. The net percent of owners who expect real sales to be higher deteriorated two points from April to a net negative 21%.

In terms of jobs, a seasonally adjusted net 19% of owners plan to create new jobs in the next three months, while 63% reported hiring or trying to hire in May, up three points from April. However, of those hiring or trying to hire, 89% reported few or no qualified applicants for their open positions.

Capital expenditures are also a topic of concern for small business owners, with 57% reporting capital outlays in the last six months. Twenty-five percent of owners plan capital outlays in the next few months, up six points from April.

Inventory management appears to be another issue affecting small businesses. A net negative 3% of owners viewed current inventory stocks as “too low” in May, up two points from April. A net negative 2% of owners plan inventory investment in the coming months.

Meanwhile, labor costs and quality continue to be a top concern for many small businesses. A net 41% of owners reported raising compensation, while 24% cited labor quality as their top business problem.

Despite these challenges, only 1% of owners reported that all their borrowing needs were not satisfied. Only 4% reported financing as their top business problem, indicating that access to finance may not be as significant a concern as labor and operational issues.

These findings highlight the complex challenges faced by small businesses in today’s economic environment. Inflation, labor shortages, and supply chain disruptions continue to shape the business landscape, affecting small businesses’ ability to operate efficiently and profitably. As such, business owners need to stay informed about economic trends and take necessary measures to adapt to the changing business environment.

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This article, "Small Business Owners Remain Concerned about Future Business Conditions" was first published on Small Business Trends