In March, the NFIB’s Small Business Optimism Index fell to its lowest levels in almost a decade, with inflation being the top concern for small business owners. The index dropped by almost a full point to 88.5, marking its lowest level since December 2012. This is the 27th straight month that the index has fallen below its 50-year average. Chief Economists William C. Dunkelberg and Holly Wade, executive director of the NFIB’s research center, noted that small businesses are showing signs of a potential economic slowdown, with net sales expectations being a major contributing factor to the decline in the Index.
Small businesses continue to view inflation as their top challenge, with 25% identifying it as the most important issue. In response, the number of owners raising their average selling prices increased by seven percentage points to 28%. The NFIB stated that due to rising prices, it is improbable that the Federal Reserve will lower its interest rates from their current 23-year high at its upcoming meetings. Only 4% of small business owners in the survey identified financing and interest rates as their primary problems they face.
Looking ahead, Wells Fargo economists Sam Bullard and Patrick Barley suggest that small business optimism will likely remain subdued as companies wrestle with rising prices, a tight labor market, and an uncertain demand outlook. Despite this gloomy outlook for small businesses, there are some positive signs on the horizon. For example, firms are finding it easier to attract workers than they have in recent years which may lead them to delay their hiring plans temporarily rather than cut back on staff entirely. Overall though
