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NFIB Survey: Business Owners Expressing Deep Concerns about Future

Inflation returns to top small-business problem, followed by labor quality

WASHINGTON — Small-business owners expecting better business conditions over the next six months declined in May, according to the new Small Business Optimism Index compiled by the National Federation of Independent Business (NFIB), and released in June. 

The Optimism Index itself increased 0.4 points in May to 89.4, which is the 17th consecutive month below the 49-year average of 98. The last time the Index was at or above the average was in December 2021.

Small-business owners expecting better business conditions over the next six months declined one point from April to a net negative 50%. The study also found that 25% of owners reported that inflation was their single most important problem in operating their business, up two points from last month and followed by labor quality at 24%.

“Overall, small-business owners are expressing concerns for future business conditions,” says Bill Dunkelberg, NFIB Chief Economist. “Supply chain disruptions and labor shortages will continue to limit the ability of many small firms to meet the demand for their products and services, while less severe than last year’s experience.”

Key findings from the study include:

  • Forty-four percent of owners reported job openings that were hard to fill, down one point from April and remaining historically very high.
  • The net percent of owners raising average selling prices decreased one point to a net 32% (seasonally adjusted) — still an inflationary level but trending down.
  • The net percent of owners who expect real sales to be higher deteriorated two points from April to a net negative 21%.

Owners’ plans to fill open positions remain elevated, with a seasonally adjusted net 19% planning to create new jobs in the next three months. Overall, 63% of owners reported hiring or trying to hire in May, up three points from April. Of those hiring or trying to hire, 89% of owners reported few or no qualified applicants for their open positions.

A net negative 8% of all owners (seasonally adjusted) reported higher nominal sales in the past three months. The net percent of owners expecting higher real sales volumes deteriorated three points to a net negative 21%.

Seasonally adjusted, a net 41% of owners reported raising compensation, up one point from April. A net 22% plan to raise compensation in the next three months, up one point. Ten percent of owners cited labor costs as their top business problem and 24% said that labor quality was their top business problem. Labor quality was in second place as the top business problem.

Fifty-seven percent of owners reported capital outlays in the last six months, up one point from April. Of those making expenditures, 38% reported spending on new equipment, 24% acquired vehicles, and 12% spent money on new fixtures and furniture. Fifteen percent improved or expanded facilities and 7% acquired new buildings or land for expansion. Twenty-five percent of owners plan capital outlays in the next few months, up six points from April.

The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. Survey respondents are randomly drawn from NFIB’s membership. The report is released on the second Tuesday of each month. This survey was conducted in May 2023.

NFIB Survey: Business Owners Expressing Deep Concerns about Future

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