NFIB Small Business Optimism Index Slips in March
by:Tom Moeller
|in:Economy in Brief
Summary
- Component declines are widespread.
- Expectations for economic improvement remain depressed.
- Inflation & labor quality remain single most important problems.
The NFIB Small Business Optimism Index slipped to 90.1 in March from 90.9 in February and 90.3 in January, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. This was the fifteenth consecutive month below the 49-year average of 98. Six of the index’s 10 components declined last month, while three increased and one was unchanged. The NFIB Small Business Uncertainty Index rose to 74 in March and remained up from a low of 55 in June of last year.
The outlook for business conditions in the next six months remained bleak in March. The net balance expecting the economy to improve held at -47%. The percent planning to increase employment fell to 15%, the least since May 2020 and down from 32% in August 2021. The percent of firms expecting higher real sales in six months fell to the lowest level since August. Expected credit conditions also deteriorated as did the sense that now was a good time to expand the business. Showing m/m improvement were earnings trends as well as those reporting that inventories were too low. The percentage of firms reporting higher earnings also became less negative.
Inflation pressures eased in March. The net balance of firms increasing their average selling price fell to 37%, remaining the lowest reading since April 2021 and down from 66% in March of last year. The net balance planning to increase selling prices in the next three months rose slightly to 26%, but that was half the percentage twelve months earlier. Inflation was viewed as the single most important problem by 24% of respondents, down from a high of 37% in July of last year.
The labor market loosened for small businesses. A lessened 53% of respondents reported few or no qualified applicants for job openings compared to a high of 61% in May of 2022. A lessened net 42% of respondents increased compensation over the last three months, down from a high of 50% in January of 2022, while a net 22% expect to raise compensation in the next three months, easing from 23% in February and down from 32% in October of 2022.
Roughly 24 million small businesses exist in the U.S., and they create 80% of all new jobs. The typical NFIB member employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver's SURVEYS database.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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