The optimism among small businesses in the United States has weakened, driven by mounting worries over inflation, according to the latest data.
The NFIB reported on Tuesday that its small-business optimism index dipped to 89.4 in February from 89.9 in January, contradicting expectations of a rise to 90.2 as projected in a poll conducted by The Wall Street Journal.
This decline underscores a persistent trend, with the index trailing the 50-year average of 98 for over two years.
A notable factor contributing to this downturn is the rising concern over inflation, with 23% of small businesses citing it as their primary worry, surpassing the previous top concern of labor quality.
NFIB Chief Economist Bill Dunkelberg highlighted that while inflation pressures have moderated since peaking in 2021, small business owners are still grappling with elevated costs stemming from higher prices and interest rates.
New jobs
Amidst these economic challenges, small business owners’ intentions to fill open positions have diminished, with only 12% planning to create new jobs in the next three months, marking the lowest level since May 2020, according to the NFIB data.
Despite these concerning indicators, there is a glimmer of optimism regarding future sales volumes, with more business owners anticipating higher real sales.
However, the overall sentiment remains negative, reflecting the prevailing economic uncertainties.
Moreover, the report revealed a decline in the number of businesses raising selling prices, hitting the lowest level since January 2021.
This trend is particularly notable in the goods sector, where prices have fallen as anticipated, but services prices are proving more resistant to decline.