Inflation destroying business confidence now
Sarah Lynch 6-13. Sarah Lynch is a staff reporter at Inc. In 2021, she graduated from Marist College with a B.A. in Communication, concentrating on Journalism and Public Relations. “Report: Small-Business Confidence Improved in May, but the Economic Outlook Is Still Challenging, Inflation and labor-quality challenges topped small-business owners' concerns--though some industries are struggling more than others.” INC. 6-13-2023. https://www.inc.com/sarah-lynch/report-small-business-confidence-improved-in-may.html. RW
Small-business confidence hit a in April, and while May brought a slight rebound, their outlook remains far from rosy.
For the 17th straight month, the Small Business Optimism Index fell below the nearly 50-year average, according to the National Federation of Independent Business's . The index increased from 89 in April to 89.4 in May--higher than The Wall Street Journal's , based on a poll of economists.
That said, a net negative 50 percent of small-business owners don't expect conditions to improve soon, a slight decline from April.
Inflation returned to the top of small-business owners' concerns: Twenty-nine percent say they have plans to increase prices, up eight percentage points from April's report. In May, 32 percent enacted price increases that month--the lowest percentage since March 2021, though "still an inflationary level," according to the report. Inflationary pressures also vary by industry: Businesses in retail, wholesale, and construction hiked prices more than others, according to the NFIB report.
The NFIB report comes the same day the latest Consumer Price Index from the Bureau of Labor Statistics shows . This could indicate some for small businesses, even if they aren't yet feeling it.
Small businesses are still hiring and planning to create new jobs--up 3 points and 2 points from April, respectively--echoing the jump in jobs added in the Bureau of Labor Statistics' Still, small-business owners face labor-quality issues, with 55 percent of owners reporting few or no qualified applicants for their positions, unchanged from April. In May, labor quality closely followed inflation as the number two concern for small-business owners overall. "The difficulty in filling open positions is particularly acute in the construction, transportation, and manufacturing sectors where compensation gains are more frequently reported," NFIB chief economist Bill Dunkelberg said in the report. The wage pressure is still on as well, with a slight increase in the small businesses raising compensation in May. But with the deceleration in in the May jobs report and signs of in Indeed job postings, that tension may be easing--if slowly. One uplifting indicator: A quarter of small-business owners are planning capital outlays--or money spent on --in the coming months. This index component had the largest increase from the April report, up six points, which the report deemed "a very positive move but historically low." It's clear small businesses will still see gray skies for a while. "Overall, small-business owners are expressing concerns for future business conditions," Dunkelberg said.