NFIB Small Business Optimism Index Weakens in April

The NFIB Small Business Optimism Index declined to 89.0 during April from an unrevised 90.1 in March and 90.9 in February, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. This was the sixteenth consecutive month below the 49-year average of 98. Six of the index’s 10 components declined m/m, while four increased. The NFIB Small Business Uncertainty Index fell to 72 in April but 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 April. The net balance expecting the economy to improve fell to -49%, a four-month low. The net balance expecting higher real sales in six months weakened to -19, the least since last August. The percent planning to make capital outlays was 19%, below its October 2021 high of 31%. The percent reporting that inventories were too low fell, along with the percent planning to add to inventories. The earnings trends reading weakened and reversed its March rise.

The percent of firms expecting to raise employment levels improved to 17% and reversed its March drop, but remained low. The percent of firms with positions unable to be filled right now rose modestly to 45%, as did those reporting that now was a good time to expand the business. Expected credit conditions improved slightly.

Inflation pressures weakened in April. The net balance of firms increasing their average selling prices fell to 33%, down from 63% twelve months earlier. The net balance planning to increase selling prices in the next three months declined to 21%, less than half the percentage twelve months earlier. Inflation was viewed as the single most important problem by 23% of respondents, down from a high of 37% in July of last year.

The labor market tightened for small businesses. An increased 55% of respondents reported few or no qualified applicants for job openings, up from a low of 51% in December. Compensation pressures, however, eased. A lessened net 40% of respondents increased compensation over the last three months, down from a high of 50% in January of 2022, while a lessened net 22% expect to raise compensation in the next three months, down from 32% in October of 2021.

The quality of labor was viewed as the single most important problem by an increased 24% of respondents. Inflation was viewed as the largest problem by a reduced 23% of respondents, down from a high 37% nine months earlier. The cost of labor was viewed as the largest problem by a lower nine percent of respondents, while a greatly increased four percent had financial & interest rate concerns, up from one percent 12 months earlier.

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.