Yaks! Small business owners’ expectations for the future at a historically low level

The most recent National Federation of Independent Business (NFIB) Small Business Optimism Index continued its slump by 3.6 points in June to 89.5, the sixth straight month below the 48-year average of 98.

NFIB Small Business Optimism Index

Small business owners’ expectations for better business conditions over the next six months fell seven points to a net negative 61%. So far, expectations for better conditions have worsened every month this year.

Inflation remains a major problem for small businesses, with just over a third (34%) of owners saying it’s the number one problem running their business. This is a six point increase from May and the highest level since the fourth quarter of 1980. Other index findings include:

The number of owners expecting actual sales to be higher fell 13 points from May to a net negative 28%. About 50% of owners reported vacancies they were unable to fill in June, one point less than the May reading. previous record high. The net percentage of owners who increased the average sales price fell three points to a net seasonal adjustment of 69%, after the all-time high in May. Ninety-four percent of small businesses that hire or attempt to hire report few, if any, qualified candidates for the positions they were trying to fill.

Declining optimism

The National Federation of Independent Business (NFIB) said the Small Business Optimism Index fell 3.6 points to 89.5 in June, the lowest level since January 2013. This is fueled by mounting concerns about inflation. In June, the consumer price index (CPI) for urban consumers rose by 1.3%, seasonally adjusted, and by 9.1% over the past 12 months.

The price increase was broad-based, with gasoline, shelter and food making the largest contributions. The energy index rose 7.5 percent this month. It contributed nearly half of the all-item gain, with the gasoline index rising 11.2 percent and other major component indices rising as well. The food index rose 1.0 percent in June, as did the food-at-home index. Across the board, June saw the largest 12-month rise in inflation since November 1981.

More than half (51%) of entrepreneurs have reported that capital expenditures have fallen in the past six months. Of those who spend, 37% reported spending on new equipment, 23% purchased vehicles, and 14% upgraded or expanded facilities. Only five percent have bought new buildings or land for expansion and 13% have spent money on new furnishing and furniture.

“In addition to the immediate challenges small business owners face, including inflation and labor shortages, the economic policy outlook is also not encouraging as policy discussions have shifted to tax hikes and more regulation,” said Bill Dunkelberg, chief economist for the NFIB.

The rising costs of goods and services have also driven customers away. A net negative 2% of all owners reported higher sales in the past three months, three points less than in May. The net percentage of owners expecting real sales volumes also fell 13 points to a net negative of 28%.

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