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In a report published on Tuesday, it was revealed that U.S. small business sentiment reached its lowest point since May 2023 in January. The National Federation of Independent Business monthly sentiment index fell to 89.9 from 91.9 in December, marking the largest decrease since December 2022. This keeps the index below its 50-year average of 98 for a 25th consecutive month.

The challenges faced by small business owners are multifaceted, with labor quality and inflation being the top concerns in January. Despite this, the share of owners citing inflation as their top concern dropped 3 points to 20%, coinciding with the Federal Reserve’s rate hike campaign in 2022 to curb inflation. However, the Fed has since signaled that rate hikes are over and it should be in a position to lower rates later this year.

Looking ahead, the portion of owners expecting better business conditions in the next six months fell 2 points to negative 38%. Additionally, the share of owners who expect higher real sales fell 12 points to negative 16% in January. These statistics paint a sobering picture of the challenges faced by small business owners and highlight the need for continued support and resources to help them navigate these uncertain times.

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