Report: Small Business Uncertainty Index Highest Since 2020
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Report: Small Business Uncertainty Index Highest Since 2020

WASHINGTON — National Federation of Independent Businesses (NFIB) Small Business Optimism Index in May it reached its highest index of the year, 90.5, which is an increase of 0.8 points, but still 29t a month below the historical average of 98.

The uncertainty index rose nine points to 85, the highest reading since November 2020. Twenty-two percent of owners said inflation was their most important concern in running a business, unchanged from April, and the top business concern among owners.

“The small business sector accounts for more than 40% of GDP and employment, a key part of the economy,” said Bill Dunkelberg, NFIB’s chief economist. “However, for 29 consecutive months, small business owners have expressed historically low optimism, and their views on future business conditions are at their worst in 50 years. Small business owners need relief because inflation on Main Street has not fallen much.”

Key findings from the report include:

  • Owners’ hiring plans rose three percentage points in May, reaching a seasonally adjusted net gain of 15%, the highest level of the year.
  • After adjusting for seasonally adjusted factors, plan prices increased by 28% in May, an increase of two percentage points compared to April.
  • Six percent of owners said financing was their biggest business concern in May, up two points from April. The last time financing was this high as a top business concern was in June 2010.

After adjusting for seasonality, a net 37% reported raising wages, down one point from April. A seasonally adjusted 18% plan to raise wages in the next three months, down three points from April and the lowest reading since March 2021. Ten percent of owners cited labor costs as their top business concern, just three points below the peak of 13% reached in December 2021. Twenty percent said job quality was their top business concern, trailing inflation as the number one issue.

The net percentage of owners raising average selling prices was unchanged from April at 25% net after adjusting for seasonality. Twenty-two percent of owners said inflation was their most important business concern. Net of inflation, 12% reported lower average selling prices, and 40% reported higher average prices.

The frequency of reports of positive profit trends was 30% (adjusted for seasonality), down three points from April and a very weak reading, the NFIB said. Among owners reporting lower profits, 32% blamed weaker sales, 15% blamed higher material costs, 14% cited labor costs and 11% cited lower selling prices. Among owners reporting higher profits, 41% attributed sales volumes, 23% cited normal seasonality and 10% cited higher selling prices.

The NFIB Research Center has collected Small Business Economic Trends data through quarterly surveys since the fourth quarter of 1973 and monthly surveys since 1986. Survey respondents are randomly selected from among NFIB members. The report is released on the second Tuesday of each month. This survey was conducted in May 2024.

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