The NFIB Small Business Optimism Index rose by three points in May, reaching 98.8, slightly surpassing the 51-year average of 98. This increase was primarily driven by improved expectations for business conditions and sales. However, the Uncertainty Index also increased by two points from April to 94. Taxes emerged as the most significant concern for small business owners, with 18% identifying it as their primary issue, marking a rise of two points since April.
NFIB Chief Economist Bill Dunkelberg commented on the situation: “Although optimism recovered slightly in May, uncertainty is still high among small business owners. While the economy will continue to stumble along until the major sources of uncertainty are resolved, owners reported more positive expectations on business conditions and sales growth.”
Jason Espinoza, NFIB State Director, highlighted ongoing concerns despite some improvement: “While small business owners are feeling a bit more hopeful, there’s no question that our members are still uncertain about the future. In fact, concerns about taxes have surpassed concerns about inflation and hiring. If Congress fails to act, small businesses will face a massive federal tax hike. Now is the time for Congress to stand up for Main Street and make the Small Business Deduction permanent.”
Key findings from the survey included:
– A net 1% of owners considered current inventory stocks “too low” in May.
– The net percentage of owners expecting better business conditions increased by 10 points to a net 25%.
– A net percentage of owners expecting higher real sales volumes rose by 11 points to a net 10%.
– Twenty-two percent plan capital outlays in the next six months.
– Sixteen percent cited labor quality as their main problem.
– Fourteen percent reported inflation as their primary issue.
In terms of employment challenges, a seasonally adjusted 34% reported unfilled job openings in May. Among those hiring or attempting to hire (55%), 86% found few or no qualified applicants.
Labor costs were identified as the main problem by 9%, an increase of one point from April. A seasonally adjusted net 26% raised compensation levels in May.
The survey also revealed that poor sales remained a top issue for small businesses at 9%. Inventory gains remained unchanged at a net negative 5%.
Price hikes were planned by a seasonally adjusted net 31%, while profit trends were negative at a net negative 26%.
Five percent identified financing and interest rates as their top concern in May.
The NFIB Research Center has been collecting data on Small Business Economic Trends since the fourth quarter of 1973 through quarterly surveys and monthly surveys since 1986.
