Optimism rises; uncertainty grows for US small businesses: NFIB

In contrast to the optimism index, the uncertainty index increased by eight points from June to 97. Twenty-one per cent of small business owners reported labour quality as their single most important problem, up five points from June and ranking as the top problem, NFIB said in its latest survey report.

“Optimism rose slightly in July with owners reporting more positive expectations on business conditions and expansion opportunities. While uncertainty is still high, the next six months will hopefully offer business owners more clarity, especially as owners see the results of Congress making the 20 per cent Small Business Deduction permanent and the final shape of trade policy. Meanwhile, labour quality has become the top issue on Main Street again,” said Bill Dunkelberg, chief economist at NFIB.

The overall business health improved in July, with more owners rating their operations positively. Thirteen per cent reported their business health as ‘excellent’ (up five points), and 52 per cent said ‘good’ (up three points), while those reporting ‘fair’ or ‘poor’ declined.

The share of owners expecting better business conditions surged 14 points to a net 36 per cent, above the historical average. Sixteen per cent said it was a good time to expand (up five points), while 22 per cent plan capital outlays in the next six months. Inflation remained the top concern for 11 per cent of owners, unchanged from June’s three-year low.

Labour market conditions eased slightly, with job openings that could not be filled falling to 33 per cent, the lowest since December 2020. Still, 84 per cent of those hiring reported few or no qualified applicants. Compensation pressures moderated, with 27 per cent raising pay (down six points) and 17 per cent planning increases in the next three months.

Sales performance was mixed. A net negative 9 per cent reported higher sales, while inventory levels remained subdued at a net negative 8 per cent. Price hikes continued, though at a slower pace, with 24 per cent raising average selling prices and 28 per cent planning increases, added the survey.

Profit trends stayed weak, with a net negative 22 per cent, as weaker sales and higher material costs weighed on margins.

The survey said that the taxes (17 per cent) ranked as the second most cited business problem after inflation, followed by labour costs (9 per cent), government regulations (8 per cent), and competition from large businesses (6 per cent). Financing issues were reported by 4 per cent of owners, with borrowing activity and rates remaining historically low.

ALCHEMPro News Desk (SG)