Small Business Optimism Increased Slightly in August

The National Federation of Independent Business (NFIB) Small Business Optimism Index increased in August to 100.1, up 0.4 points from July. Five of the 10 Index components improved, four declined, and one was unchanged. The NFIB Uncertainty Index decreased seven points to 69, the lowest level since January 2016.

“As the economy moves into the fourth quarter, small business owners are losing confidence in the strength of future business conditions,” said NFIB Chief Economist Bill Dunkelberg. “The biggest problems facing small employers right now is finding enough labor to meet their demand and for many, managing supply chain disruptions.”

Key findings include:

  • Owners expecting better business conditions over the next six months decreased by eight points to a net negative 28 percent. This indicator has declined 16 points over the past two months to its lowest reading since January 2013.
  • Fifty percent of owners reported job openings that could not be filled, an increase of one point from July and a 48-year record high for the second consecutive month.

As reported in NFIB’s monthly jobs report, 50 percent of owners reported job openings they could not fill in the current period, up one point from July and a record high reading for the second consecutive month. The number of unfilled job openings remains far above the 48-year historical average of 22 percent.

The net percent of owners reporting inventory increases rose four points to a net negative 2 percent. Over 37 percent of owners report supply chain disruptions have had a significant impact on their business, 29 percent report a moderate impact, and 21 percent report a mild impact. Only 13 percent report no impact from recent supply chain disruptions.

A net 41 percent (seasonally adjusted) reported raising compensation, up three points from July and a 48-year record high reading. A net 26 percent plan to raise compensation in the next three months, down one point from July’s record high reading. Ten percent of owners cited labor costs as their top business problem and 28 percent said that labor quality was their top business problem, up two points from July and both are record high readings.

The frequency of reports of positive profit trends declined two points to a net negative 15 percent. Among owners reporting lower profit trends, 34 percent blamed the rise in the cost of materials, 27 percent blamed weaker sales, 9 percent cited labor costs, 9 percent cited the usual seasonal change, 8 percent cited lower prices, and 3 percent cited higher taxes or regulatory costs. For owners reporting higher profits, 60 percent credited sales volumes, 20 percent cited usual seasonal change, and 10 percent cited higher prices.

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