The National Federation of Independent Business (NFIB) Small Business Optimism Index increased 0.4 points in May to 89.4, which is the 17th consecutive month below the 49-year average of 98. The last time the Index was at or above the average was in December 2021. Small business owners expecting better business conditions over the next six months declined one point from April to a net negative 50 percent. Twenty-five percent of owners reported that inflation was their single most important problem in operating their business, up two points from last month and followed by labor quality at 24 percent.
“Overall, small business owners are expressing concerns for future business conditions,” said Bill Dunkelberg, chief economist for NFIB. “Supply chain disruptions and labor shortages will continue to limit the ability of many small firms to meet the demand for their products and services, while less severe than last year’s experience.”
Key findings include:
- Forty-four percent of owners reported job openings that were hard to fill, down one point from April and remaining historically very high.
- The net percent of owners raising average selling prices decreased one point to a net 32 percent (seasonally adjusted), still an inflationary level but trending down.
- The net percent of owners who expect real sales to be higher deteriorated two points from April to a net negative 21 percent.
As reported in NFIB’s monthly jobs report, owners’ plans to fill open positions remain elevated, with a seasonally adjusted net 19 percent planning to create new jobs in the next three months. Overall, 63 percent of owners reported hiring or trying to hire in May, up three points from April. Of those hiring or trying to hire, 89 percent of owners reported few or no qualified applicants for their open positions.
Seasonally adjusted, a net 41 percent of owners reported raising compensation, up one point from April. A net 22 percent plan to raise compensation in the next three months, up one point. Ten percent of owners cited labor costs as their top business problem and 24 percent said that labor quality was their top business problem. Labor quality was in second place as the top business problem.
Among owners reporting lower profits, 29 percent blamed weaker sales, 26 percent blamed the rise in the cost of materials, 13 percent cited the usual seasonal change, 12 percent cited labor costs, 6 percent cited lower prices, and 3 percent cited higher taxes or regulatory costs. For owners reporting higher profits, 52 percent credited sales volumes, 17 percent cited higher prices, and 16 percent cited usual seasonal change.
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 May 2023.