Small business optimism reaches a six-year peak, according to the National Federation of Independent Business (NFIB) survey
Small Biz Vibes 📈
Joshua Sophy | Small Business News
The National Federation of Independent Business (NFIB) just dropped some exciting news – the Small Business Optimism Index climbed to 105.1 in December, marking a robust 3.4-point jump and the highest level since October 2018. This month-over-month increase is a testament to the growing confidence among small business owners following November's election results.
NFIB's Chief Economist Bill Dunkelberg shared the scoop, "[Small business owners] feel more assured and optimistic about the economic agenda of the new administration. They expect improved economic growth, lower inflation, and favorable business conditions, all thanks to the pro-business policies and legislation forecasted for the upcoming year."
The NFIB painted a positive picture with significant changes in several key areas:
- Economic outlook: The percentage of owners expecting a brighter economic future jumped 16 points to 52%, reaching heights last seen in the fourth quarter of 1983.
- Expansion plans: The number of business owners believing it's a great time to expand surged six points to 20%, echoing levels first reached in February 2020.
- Sales expectations: The optimism for higher real sales volumes shot up eight points to 22%, mirroring levels achieved in January 2020.
However, where there's progress, there are still challenges. Inflation remains a primary concern for 20% of owners, followed closely by labor quality, which bothers 19%. A seasonally-adjusted 35% of owners reported unfilled job positions in December, with 89% of these employers struggling to find qualified applicants.
When it comes to compensation, the NFIB reported mixed results:
- A net 29% reported upping wages, down three points from November and the lowest since March 2021.
- A net 24% plan to raise wages in the next three months, dropping four points from the previous month.
The survey revealed a mixed bag regarding profitability:
- A net negative 26% of owners reported positive profit trends, remaining unchanged from November.
- Among those reporting lower profits, weak sales, soaring material costs, and labor expenses were the top factors.
Business investments were slightly up, with 56% of owners dishing out cash over the last six months, including equipment (37%), vehicles (24%), and facility improvements (16%). Yet, plans for future capital investments took a one-point dive to 27%, retreating after November's high since January 2022.
Inventory management showed remarkable improvement, with a net 6% planning inventory investments in the coming months, marking the highest reading since December 2021. Price adjustments varied across sectors:
- Retail: 38% raised prices, 6% lowered them.
- Construction: 30% raised prices, 9% lowered them.
- Transportation: 30% raised prices, 9% lowered them.
The NFIB's December survey indicates a dramatic rise in confidence for small business owners, fueled by better economic expectations and positive vibes about upcoming business-friendly policies. However, inflation issues and labor concerns continue to loom as hurdles for Main Street businesses attempting to navigate the changing economic climate.
- The National Federation of Independent Business (NFIB) announced an increase in the Small Business Optimism Index to 105.1 in December, indicating a high level of optimism among small business owners about the economic agenda of the new administration.
- NFIB's Chief Economist Bill Dunkelberg attributed this increased optimism to the forecasted pro-business policies and legislation for the upcoming year and improvement in economic growth, lower inflation, and favorable business conditions.
- The survey showed a significant increase in the percentage of owners expecting a brighter economic future, along with a surge in the number of business owners believing it's a great time to expand and optimism for higher real sales volumes.
- However, inflation and labor quality remain primary concerns for 20% and 19% of small business owners, respectively, with 35% of owners reporting unfilled job positions in December, particularly those struggling to find qualified applicants.
- Despite some positive trends in compensation and business investments, challenges such as weak sales, soaring material costs, and labor expenses continue to impact the profitability of small businesses, and plans for future capital investments took a one-point dive in December.
