U.S. NFIB Small Business Optimism Falls to a Four-Month Low in September Amid Inflation Concerns
Summary
- NFIB Small Business Optimism Index slips 0.5 pt. to 90.8 in Sept., having remained well below its long-term average.
- Small Business Uncertainty Index posts its third m/m rise in four months.
- Outlook for business conditions in the next six months plunges to -43%, lowest since May; expected real sales up 1 pt. to -13%, still a pessimistic perspective.
- Inflation remains top business concern, tied w/ quality of labor.
The NFIB Small Business Optimism Index fell to 90.8 in September, the lowest level since May, from 91.3 in August, according to the September 2023 Small Business Economic Trends survey conducted by the National Federation of Independent Business. The index, while up from a low of 89.0 in April, had been below the 49-year average of 98 for the 21st straight month; it was also down from 92.1 in September 2022 and a high of 102.5 in June 2021. Five of the 10 index components rose, four fell, and one was unchanged. The NFIB Small Business Uncertainty Index increased to 79 in September, up for the third time in four months, after a three-point decline to 77 in August; it was up from 72 in September last year.
The outlook for business conditions in the next six months worsened and remained deeply negative in the latest survey. The net balance of respondents expecting the economy to improve decreased six points to -43% in September, the lowest level since May, on top of a seven-point drop to -37% in August, but it was up from -44% in September 2022 and a record-low -61% in June 2022. Expected real sales were up slightly to a net -13% in September from -14% in August but down from -10% in September 2022. Although the latest reading indicated continued pessimism, it was up from a low of -29% in July 2022.
Plans to make capital outlays held steady at 24% in September; the latest result was the same as in September 2022 but down from a high of 31% in October 2021. Meanwhile, plans to expand the business declined to a net 5% in September after registering at 6% for three consecutive months and also at 6% in September last year. Expected credit conditions dropped to -10% in September, the lowest reading since May, from -6% in August and also -6% in September 2022.
Labor markets remain tight with 57% of respondents reporting that qualified workers to fill job openings were hard to find in September. The latest figure was up three points from 54% in August and unchanged from 57% in September 2022 but down from a high of 61% in May 2022. A net 18% planned to increase employment in September, up from 17% in August but down from 23% in September last year. Notably, 43% reported positions not able to be filled in September following 40% in August, remaining historically very high; however, it was down from 46% in September 2022 and a high of 51% in May 2022. Overall earnings trends edged up to -24% in September, the highest level since June, from -25% in August; the latest reading was up from -31% in September last year and a low of -33% in August last year.
On the pricing front, inflation pressures, while trending down, remained at a very inflationary level. The net percent raising their average selling prices rose to a three-month-high 29% in September from 27% August, but it was down from 51% in September 2022 and a high of 66% in March 2022. The percentage planning to raise prices was unchanged at 30% in September; it was down from 31% in September 2022 and a high of 52% in March 2022.
Wage inflation also remained high as a net 36% of respondents raised compensation during the last three months, unchanged from August’s reading. Nevertheless, it was down from 45% in September 2022 and a peak of 50% in January 2022. A net 23% of firms planned to raise worker compensation in the next three months, slightly down from 26% in August and unchanged from September 2022.
Inflation continued to be a problem facing small businesses, as reported by 23% of NFIB members in September and August, down from 30% in September 2022 and a peak of 37% in July 2022. The quality of labor (23% in September vs. 24% in August) tied with inflation as the single most important problem facing small businesses. Other concerns (in September vs. August) included taxes (13% vs. 17%) and the cost of labor (9% vs. 8%).
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.
Winnie Tapasanun
AuthorMore in Author Profile »Winnie Tapasanun has been working for Haver Analytics since 2013. She has 20+ years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations. Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia. Winnie is bilingual in English and Thai with competency in French. She loves to travel (~30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.
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