Economic Outlook and Hiring
NFIB Chief Economist Bill Dunkelberg acknowledges the cynicism among small business owners regarding future economic conditions. While hiring plans have declined to their lowest level since May 2020, strong consumer spending has played a crucial role in supporting labor demand and keeping Main Street businesses afloat.
Job Openings
Despite a 4-point decrease from February, 43% of owners still reported difficulties in filling job openings, remaining historically high.
Average Selling Prices: The net percentage of owners raising average selling prices decreased by one point to 37% (seasonally adjusted).
Expectations of Real Sales
The net percentage of owners expecting higher real sales deteriorated by six points from February, resulting in a net negative 15%.
Job Creation and Labor Challenges
NFIB's monthly jobs report reveals that a seasonally adjusted net 15% of owners plan to create new jobs in the next three months. However, 26% of owners reported a shortage of qualified applicants for their open positions, and 27% reported having no applicants at all. Labor costs were cited as the top business problem by 11% of owners, while 23% highlighted concerns about labor quality, which ranks second behind inflation.
Capital Outlays and Sales Trends:
57% of owners reported capital outlays in the next six months, with a decline of three points from February. Of those making expenditures, 40% spent on new equipment, 23% acquired vehicles, and 11% invested in fixtures and furniture. However, there is little overall strength in capital spending within the small business sector.
Sales Trends and Inventory:
A net negative 6% of all owners reported higher nominal sales in the past three months, indicating a downward trend. Additionally, the net percentage of owners expecting higher real sales volumes deteriorated by six points, resulting in a net negative 15%. While 13% reported increases in stocks, 17% reported reductions, and supply chain disruptions continued to impact 19% of owners significantly.
Pricing, Compensation, and Profit Trends:
The net percentage of owners raising average selling prices decreased by one point (seasonally adjusted) to 37%, the lowest since April 2021. Concerning compensation, a net 42% of owners reported raising wages, down six points from February, while a net 22% plan to increase compensation in the next three months. Despite the negative profit trends, some owners attributed lower profits to weaker sales (31%), the rise in material costs (23%), and seasonal changes (13%), while higher profits were credited to increased sales volumes (48%), higher prices (21%), and seasonal changes (18%).
Access to Financing:
Two percent of owners reported dissatisfaction with their borrowing needs being met, while 29% stated that all their credit needs were satisfied. Notably, 59% of owners expressed no interest in obtaining a loan. Moreover, a net 9% reported facing increased difficulty in securing loans, reflecting a four-point increase. Although interest rates are rising, credit availability remains stable.
The Small Business Optimism Index's decrease reflects the prevailing challenges faced by small business owners, including concerns about inflation, hiring difficulties, and uncertainty about future economic conditions. While strong consumer spending has provided some support, it is essential to address the obstacles hindering small business growth and maintain stability in the overall business environment.
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Capital Outlays and Sales Trends:
57% of owners reported capital outlays in the next six months, with a decline of three points from February. Of those making expenditures, 40% spent on new equipment, 23% acquired vehicles, and 11% invested in fixtures and furniture. However, there is little overall strength in capital spending within the small business sector.
Sales Trends and Inventory:
A net negative 6% of all owners reported higher nominal sales in the past three months, indicating a downward trend. Additionally, the net percentage of owners expecting higher real sales volumes deteriorated by six points, resulting in a net negative 15%. While 13% reported increases in stocks, 17% reported reductions, and supply chain disruptions continued to impact 19% of owners significantly.
Pricing, Compensation, and Profit Trends:
The net percentage of owners raising average selling prices decreased by one point (seasonally adjusted) to 37%, the lowest since April 2021. Concerning compensation, a net 42% of owners reported raising wages, down six points from February, while a net 22% plan to increase compensation in the next three months. Despite the negative profit trends, some owners attributed lower profits to weaker sales (31%), the rise in material costs (23%), and seasonal changes (13%), while higher profits were credited to increased sales volumes (48%), higher prices (21%), and seasonal changes (18%).
Access to Financing:
Two percent of owners reported dissatisfaction with their borrowing needs being met, while 29% stated that all their credit needs were satisfied. Notably, 59% of owners expressed no interest in obtaining a loan. Moreover, a net 9% reported facing increased difficulty in securing loans, reflecting a four-point increase. Although interest rates are rising, credit availability remains stable.
The Small Business Optimism Index's decrease reflects the prevailing challenges faced by small business owners, including concerns about inflation, hiring difficulties, and uncertainty about future economic conditions. While strong consumer spending has provided some support, it is essential to address the obstacles hindering small business growth and maintain stability in the overall business environment.