Haver Analytics
Haver Analytics
USA
| Sep 10 2024

U.S. NFIB Small Business Optimism Index Backpedals in August

Summary
  • Expectations for economy & sales decline.
  • Employment plans weaken but job openings surge.
  • Prices ease but expectations edge higher.

The NFIB Small Business Optimism Index declined to 91.2 during August after rising to 93.7 in July, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. The index held steady y/y but has improved from a March low of 88.5. Eight of the 10 index components declined last month. The NFIB Small Business Uncertainty Index increased to 92 in August. It remained higher than its recent low of 65 in November 2023.

The outlook for business conditions in the next six months deteriorated in the latest survey. The net balance of respondents expecting the economy to improve fell to -13% in August from -7% in July but remained higher than a record-low of -61% in June 2022. Expected real sales fell to a net -18% in August, a five-month low. The latest reading as increased from a low of -29% in July 2022. A steady net -16% of respondents reported higher nominal sales in the past three months, down from the most recent positive reading of 1% in May 2022.

Plans to make capital outlays increased to 24% in August following three straight months at 23%. This reading was up from its recent low of 20% in March but remained below a high of 31% in October 2021. Plans to expand business fell to 4% in August after rising to 5% in July and holding at 4% for the prior four consecutive months. Expected credit conditions deteriorated to -8% in August, after three consecutive months at -7, and remained below its high six months ago.

On the labor front, 56% of respondents reported few or no qualified workers to fill job openings in August, up from 49% in July and the highest percentage since September of last year. These readings were below a high of 61% in May 2022. A net 13% planned to increase employment in August, below the most recent high of 18% in November of last year and a peak of 32% in August 2021.

Overall earnings trends deteriorated sharply last month to the weakest reading since March 2020, falling to -37% in August from -30% in July.

On the pricing front, the net percent raising their average selling prices declined to 20% in August, down from 22% in July and below a high of 66% in March of 2022. The percentage planning to raise prices edged higher to 25% in August from 24% in July but remained well below a high of 52% in March 2022.

Wage inflation held steady as a net 33% of respondents raised compensation during the last three months, the same as in July but below 38% reported in the June survey. Compensation peaked at 50% in January 2022. A net 20% of firms planned to raise worker compensation in the next three months, up from 18% in July but below a high of 32% in October 2022.

Inflation continued to be the single most important issue facing small businesses, as reported by 24% of NFIB members in August. The quality of labor was the second most important concern as reported by 21% of members. Other major concerns were taxes, 13%, the cost of labor, 9%, and government requirements, 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.

  • 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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