Small businesses remain 'cynical' about the economy: NFIB

·2 min read

Small business owners see some inflation pressures easing, but remain "cynical" about the overall U.S. economic outlook.

The National Federation of Independent Business' (NFIB) optimism index rose 0.5 to 90.3 last month, an improvement from 89.8 in December. Still, this reading remains below the 49-year average for the index, the NFIB said in a release on Tuesday.

Two areas that continue to weigh on small business sentiment are labor and inflation. Twenty-six percent of owners say inflation was their single biggest dilemma when managing their business. Additionally, the outlook remains tough to get excited about for most respondents.

"While inflation is starting to ease for small businesses, owners remain cynical about future business conditions," NFIB Chief Economist Bill Dunkelberg said in a statement.

"Count small business owners among the crowd predicting a recession," Dunkelberg wrote in the report. "The Index of Small Business Optimism has been in recession territory all last year and into 2023. If it weren't for the Job Openings and Hiring Plans components, the Index would be much lower."

Data from NFIB's monthly jobs report showed 57% of owners were trying to hire new employees at the start of the new year. Among those open to staffing up, 91% of owners said they were dealing with unqualified applicants.

The survey found 45% of owners struggled to fill positions, up from December's figures. Some have taken the initiative to reduce employment rather than increasing it.

"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," Dunkelberg added.

On the sales side, owners expect sales volumes to deteriorate to a net negative 14%, a figure which takes the number of business owners expecting higher sales and subtracts those expecting lower sales over the next three months.

"Overall, a weak set of sales conditions," the NFIB said

The survey also revealed that on a seasonally adjusted basis, a net of 42% of business owners have raised their average selling prices compared to last month, the lowest reading since May 2021. In its release, the NFIB said this figure remains "too high for [the Fed's] 2% target."

Overall, a net 29% of small businesses plan to raise prices.

Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter @daniromerotv

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