The National Federation of Independent Business – small business optimism survey came in at 102.8 in January. 2.3 points below last month, but remains above the long-term average (97.9 – orange line) for the 3rd consecutive month. The last time this occurred was over 3 years ago.
“Overall, small business owners remain optimistic regarding future business conditions, but uncertainty is on the rise. Hiring challenges continue to frustrate Main Street owners as they struggle to find qualified workers to fill their many open positions. Meanwhile, fewer plan capital investments as they prepare for the months ahead.” – NFIB Chief Economist Bill Dunkelberg
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The net percent of owners raising average selling prices fell two points from December to a net 22% seasonally adjusted. Eighteen percent of owners reported that inflation was their single most important problem in operating their business, down two points from December and matching labor quality as the top issue. The last time it was this low was in November 2021. Unadjusted, 9% of owners reported lower average selling prices and 30% reported higher average prices.
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All but one of the index components were down for the month but remain well above their levels of a few months ago. It is interesting to see the contrast between consumer optimism and small business optimism. Both sentiment indicators report uncertainty levels at or near all-time highs. Consumers gravitate towards the negative, assuming the worst, while small business owners are trying to see through the uncertainty and focus on those aspects that will positively effect their businesses (lower tax rates and reduced regulatory costs). They see it as a net positive so far.
Small businesses make up a substantial part of the US economy. Seeing optimism increase means better chances of increasing employment, capital investments, and expanding operations.