Small Businesses Report Decreasing Optimism Across Four Key Industries in July

Date: September 15, 2022

Retail reports the lowest optimism index score

On September 7, the NFIB Research Center released a quarterly Small Business Economic Trends industry report that focuses on the current state of business operations in four key industries: Construction, Manufacturing, Retail, and Services.  

The overall Optimism Index in July was 89.9, with Retail lagging significantly behind the other three industries. “Small business owners in various industries continue to manage historic economic headwinds that are impacting their day-to-day business,” said Holly Wade, Executive Director of NFIB’s Research Center. “Each industry is handling a unique set of circumstances resulting in varying degrees of owner optimism.” 

In the Construction Industry, the Optimism Index decreased 1.2 points from April and was 91.3 in July.  

However, these small businesses have been hit particularly hard by the ongoing hiring crisis: over three-fifths of all industry small businesses (62%) said that they had unfilled job openings, up four points from April and the highest of the four industries surveyed. Sixty-seven percent reported few or no qualified applicants to their job listings, up three points from April. 

Earnings continued to fall in construction, with a net negative 22% reporting increased earnings – meaning that the number of owners whose earnings fell was 22 points higher than the number of owners whose earnings increased. This was a 2-point decrease from April. 

The Manufacturing Industry continues to show the highest level of optimism of the featured industries, with an Optimism Index of 93.2, 3.3 points above the overall index. However, optimism about future sales plummeted 28 points, with a net negative 29% reporting that they expect higher sales in the next few months compared to a net negative 1% in April. 

Like Construction, Manufacturing continues to struggle to fill open positions, with 59% of all firms reporting unfilled job positions. This is the second-highest of the four industries surveyed, and 10 points higher than for all firms. 

A net 28% of firms say they plan to create new jobs despite the shortage, eight points above the overall reading.  

In the Retail Industry, the July Optimism Index was 85.8, a full eight points down from the previous report and the lowest of the four industries surveyed. Earning trends fell from a net negative 18% to a net negative 33%, while expectations for economic conditions over the next six months fell seven points to a net negative 53%.  

Inventory shortages were previously a major concern in Retail, but now 0% are reporting that their current inventory levels are “too low”, compared to a net 2% of all small businesses A net negative 6% intend to increase their inventories soon, seven points lower than the reading for the overall population.  

Lastly, the Service Sector Optimism Index decreased two points from last quarter to 92.2. 

This industry’s decrease was driven by lower expectations of better economic conditions and higher sales in the near future. Service businesses’ concern about future sales over the next three months was unchanged from April at a net negative 8%. 

You can read the full industry-specific SBET report here 

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