NFIB Small Business Optimism Continues to Rise in June

The Small Business Optimism Index from the National Federation of Independent Business improved 1.1% to 91.5 (0.5% y/y) during June after increasing an unrevised 0.9% in May and an unrevised 1.4% in April. Survey respondents, however, became a little less tentative about the future. The Business Uncertainty Index fell 3.5% (+7.9% y/y) to 82 last month after rising sharply for six consecutive months to a high of 85. It has increased from a low of 55 in June 2022.

The net balance expecting economic improvement rose to -25% in June from -30% in May. The reading has been trending higher from a low of -61 on June 2022. The net balance expecting higher real sales in six months, however, held steady at -13% last month and has been trending sideways since late-2022. The balance reporting that now was a good time to expand the business was 4% for the fourth straight month, though it was increased from a March 2023 low of 2%. Earnings trends were little changed last month after deterioration in May, and expected credit conditions were unchanged after May’s sharp improvement.

The labor market readings were similarly mixed in May. The reading for current job openings declined sharply to 37% and fully revered two straight months of increase. The reading remained below the May 2022 high of 51%. The figure for the percent of firms planning to raise employment also held steady at 15% and remained well below the high of 32% in August 2021. The percent of firms reporting few or no qualified applicants for job openings remained at 51% for the third straight month. It remained well below the September 2021 high of 62%. The quality of labor was considered the single most important problem by a slightly eased m/m to 19% of firms but was increased from a low of 16% in February.

The percentage of respondents indicating that inventories were too low was -2% versus -8% in May. The percent of firms planning to add to inventories rose sharply in June to -2% after two months at -6%, falling sharply from zero in October of last year. The figure compared to a record low of -8% in January 2023.

Labor compensation pressures remained muted. The June reading showed that a net 38% of respondents increased compensation over the last three months, up from a low of 35% in February but down from 50% in January of 2022. An improved net 22% expect to raise compensation in the next three months, up from a low of 18% in May but still down from a high of 29% six months ago. The cost of labor in June was viewed as the biggest problem by a higher 11% of respondents and that was increased from a low of 8% in November of last year.

Pricing pressures were little changed in June. The net balance of firms increasing their average selling prices was 27% compared to 25% in May. This figure remained down from 29% twelve months earlier and a March 2022 high of 66%. The net balance planning to increase selling prices in the next three months eased to 26% from 28% in May. It remained up from an April 2023 low of 21%. Inflation was viewed as the single most important problem by a lessened 21% of respondents, down from a March high of 25%.

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s SURVEYS database.

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