Inflation remains biggest problem for small businesses
Washington DC (June 11, 2024) – of NFIB Small Business Optimism Index In May, it reached its highest reading this year at 90.5, up 0.8 points but still down 29.Number The month was below the historical average of 98. The Uncertainty Index rose 9 points to 85, the highest level since November 2020. 22% of business owners said inflation is the most important issue facing them in running their business, unchanged from April and still the top business issue among business owners.
“The small and medium-sized enterprise sector generates more than 40 percent of GDP and employment and is a vital part of the economy,” he said. NFIB Chief Economist Bill Dunkelberg“But for the 29th consecutive month, small business owners have shown historically low optimism, and their views about the future business environment are at their worst level in the past 50 years. With inflation not providing much relief on Main Street, small business owners need relief.”
Key findings include:
- The number of owners who considered their current inventory to be “too low” in May was a net minus 8 percent (seasonally adjusted), down 4 percentage points from April and the lowest since October 1981.
- Hiring plans among employers rose 3 percentage points in May to a seasonally adjusted net 15 percent, the highest figure this year.
- On a seasonally adjusted basis, prices rose a net 28% in May, up 2 percentage points from April.
- Six percent of executives said fundraising was their biggest business issue in May, up two percentage points from April. This is the first time fundraising has been this high as a top business issue since June 2010.
According to the NFIB's monthly employment report, a seasonally adjusted net 18% plan to increase compensation over the next three months, down three percentage points from April and the lowest since March 2021. Forty-two percent of all owners (seasonally adjusted) reported having job openings they were unable to fill in the current period.
Fifty-eight percent of owners report making a capital expenditure in the past six months, up two percentage points from April. Of those who spent, 40% reported spending on new equipment, 25% on vehicles, and 16% on facility improvements or expansions. 11% spent money on new fixtures or furniture, and 6% acquired a new building or land for expansion. 23% (seasonally adjusted) are planning capital expenditures in the next six months, up one percentage point from April.
Of all owners, the number of owners reporting nominal sales increases over the past three months was a net decrease of 14 percent (seasonally adjusted). The net percentage of owners expecting real sales increases decreased one percentage point to a net decrease of 13 percent (seasonally adjusted).
The net percentage of owners reporting increases in inventory decreased 1 percentage point to a net negative 7%. On a seasonally unadjusted basis, 11% reported increases in inventory and 15% reported decreases in inventory.
Owners who considered their current inventories to be “too low” in May were down a net 8 percent (seasonally adjusted), the lowest since October 1981. Owners planning to invest in their inventory in the coming months were down a net 6 percent (seasonally adjusted), unchanged from April.
The seasonally adjusted net percentage of owners who increased their average sales price was a net 25%, unchanged from April. 22% of owners said inflation was the most important issue in running their business. Unadjusted, 12% reported a decrease in their average sales price and 40% reported an increase in their average sales price.
The largest price increases were in the retail (55% up, 6% down), finance (50% up, 3% down), construction (42% up, 9% down), manufacturing (42% up, 12% down) and services (37% up, 6% down). On a seasonally adjusted basis, a net 28% plan to increase prices in May.
On a seasonally adjusted basis, a net 37% reported increasing compensation, down 1 percentage point from April. On a seasonally adjusted basis, 18% plan to increase compensation in the next three months, down 3 percentage points from April and the lowest figure since March 2021. Ten percent of business owners cited labor costs as their biggest business issue, just three points below the high of 13% in December 2021. Twenty percent said labor quality is their biggest business issue, making it the No. 1 issue after inflation.
The frequency of reports of positive profit trends was very poor, a net negative 30% (seasonally adjusted), 3 percentage points worse than April. Of those owners who reported a decrease in profits, 32% cited slower sales, 15% higher material costs, 14% higher labor costs, and 11% lower selling prices. Of those owners who reported an increase in profits, 41% cited lower sales volume, 23% normal seasonal fluctuations, and 10% higher selling prices.
Three percent of owners reported that all of their borrowing needs were not met. 29 percent reported that all of their credit needs were met, and 58 percent said they were not interested in a loan. A net 6 percent reported that their last loan was harder to obtain than their previous attempt.
Six percent of executives said fundraising was their biggest business issue in May, up two percentage points from April. This is the first time fundraising has been this high as a top business issue since June 2010.
The NFIB Research Center has collected small business economic trends data in quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. Survey respondents are randomly selected from NFIB's membership. Reports are released on the second Tuesday of each month. This survey was conducted in May 2024.