SMALL BUSINESS ECONOMIC TRENDS
NFIB’s Small Business Optimism Index decreased by 1.1 points in April to 89.0. This marks the 16th consecutive month below the survey’s 49-year history of 98. Labor quality was the top business problem at 24%, with inflation in second place by one point at 23%.
“Optimism is not improving on Main Street as more owners struggle with finding qualified workers for their open positions,” said NFIB Chief Economist Bill Dunkelberg. “Inflation remains a top concern for small businesses but is showing signs of easing.”
Key findings include:
– The frequency of reports of positive profit trends was a net negative 23%, five points worse than March.
– A net negative 5% of owners viewed current inventory stocks as “too low” in April, down six points from March. This suggests stocks are now too large relative to expected sales.
– The net percent of owners raising average selling prices decreased four points to a net 33% (seasonally adjusted).
– The net percent of owners who expect real sales to be higher deteriorated four points from March to a net negative 19%.
As reported in NFIB’s monthly jobs report, owners’ plans to fill open positions remain elevated, with a seasonally adjusted net 17% planning to create new jobs in the next three months. Seasonally adjusted, a net 40% reported raising compensation. A net 21% plan to raise compensation in the next three months. Nine percent cited labor costs as their top business problem and 24% said that labor quality was their top business problem.
Fifty-six percent of owners reported capital outlays in the last six months, down one point from March. Of those making expenditures, 40% reported spending on new equipment, 23% acquired vehicles, and 11% spent money on new fixtures and furniture. Fifteen percent improved or expanded facilities and 6% acquired new buildings or land for expansion. Nineteen percent of owners plan capital outlays in the next few months, down one point from March and historically very weak.
A net negative 9% of all owners (seasonally adjusted) reported higher nominal sales in the past three months, down three points. The net percent of owners expecting higher real sales volumes deteriorated four points to a net negative 19%.
The net percent of owners reporting inventory increases declined six points to a net negative 7%. Not seasonally adjusted, 13% reported increases in stocks and 19% reported reductions. Eighteen percent of owners recently reported that supply chain disruptions still have a significant impact on their business. Another 31% reported a moderate impact, and 37% reported a mild impact.
A net negative 5% of owners viewed current inventory stocks as “too low” in April, down six points from March. By industry, shortages are the most frequent in manufacturing (10%), agriculture (9%), retail (9%), and wholesale (8%). Shortages in construction (6%) have been reduced because home sales have slowed dramatically due to higher interest rates. A net negative 5% of owners plan inventory investment in the coming months, down one point from March.
The net percent of owners raising average selling prices decreased four points from March to a net 33% (seasonally adjusted), the lowest since March 2021. Unadjusted, 12% reported lower average selling prices and 48% reported higher average prices. Price hikes were the most frequent in construction (59% higher, 7% lower), retail (59% higher, 8% lower), wholesale (54% higher, 14% lower), and finance (52% higher, 5% lower). Seasonally adjusted, a net 21% plan price hikes.
The frequency of reports of positive profit trends was a net negative 23%, five points worse than in March. Among the owners reporting lower profits, 29% blamed weaker sales, 20% blamed the rise in the cost of materials, 13% cited the usual seasonal change, 10% cited labor costs, 9% cited lower prices, and 4% cited higher taxes or regulatory costs. For owners reporting higher profits, 51% credited sales volumes, 16% cited higher prices, 15% cited usual seasonal change, and 4% cited lower labor costs.
Two percent of owners reported that all their borrowing needs were not satisfied. Thirty percent of owners reported all credit needs were met and 59% said they were not interested in a loan. A net 6% reported their last loan was harder to get than in previous attempts, down three points. Four percent reported that financing was their top business problem. A net 26% of owners reported paying a higher rate on their most recent loan.
NFIB’s Research Foundation randomly sampled 12,500 NFIB members between mid-November and mid-December, 2012 and asked them about a range of issues concerning the current federal tax code. Here’s how small business owners responded about how much taxes impact their ability to operate their businesses. Download the Study