Small business owners’ optimism remains low in the face of rising inflation, tight labor market, and the prospect of falling sales, according to the latest Small Business Optimism Index released by the National Federation of Independent Business (NFIB).
The June index, currently standing at 91, is below the 50-year average of 98, underscoring a state of economic uncertainty. NFIB Chief Economist, Bill Dunkelberg, said the reading is “clearly in recession territory,” with the most recent high of 104 achieved early in former President Donald Trump’s term.
Despite a slight uptick from the previous month, small business sentiment is deeply affected by top concerns such as inflation and labor quality. NFIB reports that businesses are attempting to offset higher costs by raising prices, although the pace of these increases has slowed. Notably, 44% of businesses are raising prices, while 12% are resorting to price cuts. Dunkelberg suggests that price fluctuation creates a “very dynamic situation,” with small business owners having a “very negative outlook for the second half.”
Data reveals a continuing trend of job openings remaining high in the face of difficulties in filling positions, particularly in manufacturing, construction, and transportation sectors. This labor market scenario persists despite a slowdown in U.S. job growth, with an average of 278,000 jobs added per month this year compared to last year’s monthly average of 399,000. NFIB warns that further negative shifts in the job market could further dampen the small business optimism index, signalling a potential downturn in the economic outlook.
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