NFIB: Inflation Still Top Business Problem

According to the National Federation of Independent Business (NFIB) Small Business Optimism Index, inflation has eased slightly for small businesses but it remains the top business problem owners are facing.

The NFIB’s report found that the net percent of owners raising average selling prices decreased 1 point month-over-month to a net 42 percent (seasonally adjusted). This was the lowest since May 2021. Unadjusted, 10 percent reported lower average selling prices, while 51 percent reported higher average prices. Price increases were found to be most prevalent in construction, retail, wholesale, and transportation.

NFIB Chief Economist Bill Dunkelberg commented, “While inflation is starting to ease for small businesses, owners remain cynical about future business conditions. Owners have a negative outlook on the small business economy but continue to try to fill open positions and return to a full staff to improve productivity.”

Forty-five percent of business owners reported job openings that were hard to fill. This was up four points month-over-month. According to the NFIB, this percentage is very high historically.
The report reiterated findings from the NFIB’s jobs report, such as 57 percent of owners reported hiring or trying to hire. Of those hiring/trying to hire, 91 percent reported few or no qualified applicants for the positions they were trying to fill.

The net percent of business owners who said they expect real sales to be higher dropped four points month-over-month to a net negative 14 percent.

Fifty-nine percent of owners reported capital outlays in the previous six months. This number was up four points. Of those making expenditures, the report found, 42 percent of owners reported spending on new equipment, 24 percent acquired vehicles, and 11 percent spent money on new fixtures and furniture. Fourteen percent improved or expanded facilities, while eight percent acquired new buildings or land for expansion. Twenty-one percent said they plan capital outlays in the coming months.

More businesses reported inventory increases. According to the NFIB, "Accumulation is starting now that supply problems are being resolved and consumer spending has eased."

Seventeen percent reported increases in stocks, and 17 percent reported reductions. Twenty-five percent reported that supply chain disruptions have had a significant impact on their business. Shortages were most frequently reported in wholesale (14 percent), retail (13 percent), manufacturing (11 percent), and finance (10 percent).

Forty-six percent of business owners reported raising compensation. Twenty-two percent reported they plan to raise compensation in the coming three months. That is down five points from the previous month. Ten percent of owners cited labor costs as their top business problem and 24 percent said that labor quality was their top business problem.

More businesses reported positive profit trends than the previous month. Among those reporting lower profits, 27 percent blamed weaker sales, while 26 percent pointed to the rising cost of materials. Fifteen percent cited seasonal change and 11 percent cited labor costs. For those reporting higher profits, 53 percent cited sales volumes, 23 percent cited usual seasonal change, and 11 percent cited higher prices.