Inflation and labor struggles continue to hinder the small business economy
WASHINGTON, D.C. (Nov. 14, 2023) – NFIB is celebrating 50 years of the Small Business Economic Trends survey, but small business owners are not feeling optimistic in the current economic environment. The Optimism Index decreased 0.1 points in October to 90.7, marking the 22nd month below the 50-year average. The last time the Optimism Index was at or above the average was December 2021.
“This month marks the 50th anniversary of NFIB’s small business economic survey,” said NFIB Chief Economist Bill Dunkelberg. “The October data shows that small businesses are still recovering, and owners are not optimistic about better business conditions. Small business owners are not growing their inventories as labor and energy costs are not falling, making it a gloomy outlook for the remainder of the year.”
Key findings include:
- Twenty-two percent of owners reported that inflation was their single most important problem in operating their business, down one point from last month.
- Owners expecting better business conditions over the next six months was unchanged from September at a net negative 43% (seasonally adjusted).
- A net negative 17% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down nine points from September and the lowest reading since July 2020.
- Forty-three percent (seasonally adjusted) of owners reported job openings that were hard to fill, unchanged from September and remains historically very high.
- Seasonally adjusted, a net 24% plan to raise compensation in the next three months, up one point from September.
- The frequency of reports of positive profit trends was a net negative 32%, down eight points from September.
- The net percent of owners who expect real sales to be higher increased three points from September to a net negative 10%.
As reported in NFIB’s monthly jobs report, a seasonally adjusted net 17% of owners plan to create new jobs in the next three months. Overall, 61% of owners reported hiring or trying to hire in October. Of those hiring or trying to hire, 90% of owners reported few or no qualified applicants for the positions they were trying to fill.
Fifty-seven percent of owners reported capital outlays in the last six months, unchanged from September. Of those making expenditures, 37% reported spending on new equipment, 24% acquired vehicles, and 18% improved or expanded facilities. Twelve percent spent money on new fixtures and furniture and 7% acquired new buildings or land for expansion. Twenty-four percent of owners plan capital outlays in the next few months.
A net negative 17% (seasonally adjusted) of all owners reported higher nominal sales in the past three months, down nine points from September and the lowest reading since July 2020. The net percent of owners expecting higher real sales volumes improved three points to a net negative 10%.
The net percent of owners reporting inventory gains decreased three points to a net negative 6%. Not seasonally adjusted, 11% reported increases in stocks and 16% reported reductions. A net negative 3% of owners viewed current inventory stocks as “too low” in October, up one point from last month.
By industry, shortages are reported the most frequent in the transportation (16%), finance (12%), and retail (11%) sectors. Shortages in construction (6%) have been reduced because home sales have slowed dramatically due to higher interest rates. A net 0% of owners plan inventory investment in the coming months, up one point from September.
The net percent of owners raising average selling prices increased one point from September to a net 30% seasonally adjusted. Twenty-two percent of owners reported that inflation was their single most important problem in operating their business, down one point from last month.
Unadjusted, 11% of owners reported lower average selling prices and 39% reported higher average prices. Price hikes were the most frequent in finance (56% higher, 7% lower), retail (47% higher, 8% lower), construction (41% higher, 7% lower), transportation (41% higher, 18% lower), and wholesale (39% higher, 14% lower). Seasonally adjusted, a net 33% of owners plan price hikes.
Seasonally adjusted, a net 36% of owners reported raising compensation, unchanged from September. A seasonally adjusted net 24% of owners plan to raise compensation in the next three months, up one point from September. Nine percent cited labor costs as their top business problem and 23% said that labor quality was their top business problem.
The frequency of reports of positive profit trends was a net negative 32%, down eight points from September. Among owners reporting lower profits, 32% blamed weaker sales, 21% blamed the rise in the cost of materials, 14% cited labor costs, 10% cited lower prices, 7% cited the usual seasonal change, and 4% cited higher taxes or regulatory costs. For owners reporting higher profits, 55% credited sales volumes, 20% cited usual seasonal change, and 7% cited higher selling prices.
Two percent of owners reported that all their borrowing needs were not satisfied. Twenty-three percent reported all credit needs met and 64% said they were not interested in a loan. A net 7% reported their last loan was harder to get than in previous attempts. Five percent of owners said that financing was their top business problem. A net 22% of owners reported paying a higher interest rate on their most recent loan.
The NFIB Research Center has collected Small Business Economic Trends data with quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. Survey respondents are randomly drawn from NFIB’s membership. The report is released on the second Tuesday of each month. This survey was conducted in October 2023.
