US Small Business Optimism Index drops to 100.7 in Feb

In February, the country’s business owners' economic outlook declined, with the net per cent expecting improvement dropping 10 points to 37 per cent. Only 12 per cent saw it as a good time to expand, marking the largest drop since April 2020. Eleven per cent of owners reported the health of their business as excellent, 55 per cent reported it as good, 27 per cent reported it as okay, and 6 per cent reported bad, NFIB said in a press release.

A seasonally adjusted 38 per cent of all small business owners reported job openings they could not fill in February, up three points from January and the highest reading since August 2024. Of the 53 per cent of owners hiring or trying to hire in January, 89 per cent reported few or no qualified applicants for the positions they were trying to fill. A seasonally adjusted net 15 per cent of owner’s plan to create new jobs in the next three months, down three points from January.

The per cent of small business owners reporting labour quality as the single most important problem for business rose one point from January to 19 per cent, surpassing inflation as the top issue. Labour costs reported as the single most important problem for business owners rose three points in February to 12 per cent, only one point below the highest reading of 13 per cent reached in December 2021.

Seasonally adjusted, a net 33 per cent reported raising compensation, unchanged from January. A seasonally adjusted net 18 per cent plan to raise compensation in the next three months, down two points from January.

Fifty-eight per cent of owners reported capital outlays in the last six months, unchanged from January. Of those making expenditures, 37 per cent reported spending on new equipment, 30 per cent acquired vehicles, and 13 per cent improved or expanded facilities.

A net negative 12 per cent of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down two points from January. The net per cent of owners expecting higher real sales volumes fell six points from January to a net 14 per cent (seasonally adjusted). This is the second consecutive month real sales expectations declined after surging from recession levels after the election.

The net per cent of owners reporting inventory gains was unchanged from January at a net negative 6 per cent, seasonally adjusted. Not seasonally adjusted, 8 per cent reported increases in stocks and 19 per cent reported reductions.

A net negative 5 per cent (seasonally adjusted) of owners viewed current inventory stocks as ‘too low’ in February, down four points from January. A net negative 1 per cent (seasonally adjusted) of owner’s plan inventory investment in the coming months, down one point from January.

The net per cent of owners raising average selling prices rose 10 points from January to a net 32 per cent, seasonally adjusted. Sixteen per cent of owners reported that inflation was their single most important problem in operating their business, down two points from January and just under labour quality as the top issue. The last time it was this low was October 2021.

Unadjusted, 6 per cent of owners reported lower average selling prices and 38 per cent reported higher average prices. Price hikes were the most frequent in the finance (53 per cent higher, 10 per cent lower), wholesale (47 per cent higher, 0 per cent lower), agriculture (45 per cent higher, 12 per cent lower), and retail (45 per cent higher, 5 per cent lower) sectors.

Seasonally adjusted, a net 29 per cent plan price hikes, up three points from January. The frequency of reports of positive profit trends was a net negative 24 per cent (seasonally adjusted), one point worse than in January.

Among owners reporting lower profits, 40 per cent blamed weaker sales, 13 per cent cited usual seasonal change, 11 per cent cited labour costs, and 9 per cent blamed the rise in the cost of materials. For owners reporting higher profits, 52 per cent credited sales volumes, 15 per cent cited usual seasonal change, and 13 per cent cited higher selling prices.

A net 2 per cent reported their last loan was harder to get than in previous attempts. The last time this reading was this low was in February 2022. Three per cent of owners reported that financing and interest rates were their top business problem in February, unchanged from January. A net 4 per cent reported paying a higher rate on their most recent loan.

“Uncertainty is high and rising on Main Street, and for many reasons. Those small business owners expecting better business conditions in the next six months dropped and the per cent viewing the current period as a good time to expand fell but remains well above where it was in the fall. Inflation remains a major problem, ranked second behind the top problem, labour quality,” said Bill Dunkelberg, chief economist at NFIB.

ALCHEMPro News Desk (SG)