Small business optimism declines due to persistent inflation and labor shortage.
Small business optimism took a hit in August, according to a recent study, as American companies faced challenges in hiring new workers amidst persistent inflation.
The National Federation of Independent Business (NFIB), which surveyed over 600 small businesses, reported a decline in optimism for August, following three consecutive months of rising sentiment.
Despite higher interest rates and a struggling real estate market, the U.S. economy continued to grow last month.
Overall inflation has slowed over the past year, as the Federal Reserve aggressively raised interest rates to their highest level in 22 years.
Although consumer prices slightly rose from July, many business owners are increasingly worried about future price conditions, despite solid consumer spending.
Businesses Lose Confidence as Summer Spending Ends
According to the NFIB’s Small Business Optimism Index for August, there was a 0.6 percent drop to 91.3, marking the 20th consecutive month below the 49-year average of 98.
“With small business owners’ views about future sales growth and business conditions discouraging, owners want to hire and make money now from strong consumer spending,” wrote NFIB Chief Economist Bill Dunkelberg.
“Inflation and the worker shortage continue to be the biggest obstacles for Main Street.”
Expectations of improved business conditions over the next six months fell seven points in August to a net negative 37 percent, an improvement from last June’s negative 61 percent, but still at recession levels.
The percentage of owners who expected sales to rise decreased two points from the previous month, to a net negative 14 percent, a three-year low.
Twenty-three percent of small business owners reported inflation as their single most important problem in August, a rise of 2 percent.
Owing to tighter loan requirements, the percentage of firms planning capital outlays fell to a four-month low, but most small-business owners said that all of their credit needs were met.
Businesses that raised their average selling prices in August rose by 2 percent to an annual seasonally adjusted 27 percent.
About 40 percent of small business owners told surveyors that they had difficulty filling positions last month, a slight decline from July and a historic high.
Although fewer firms said they would boost compensation in August, 26 percent said they planned to raise compensation in the next three months.
The construction, service, and manufacturing sectors reported the greatest difficulty filling open positions, according to the survey.
It comes after the Labor Department reported new job openings falling below 9 million in July for the first time since March 2021.
US Households Expected to Face Challenges This Fall
Many U.S. households are facing challenges toward the end of the year, including the resumption of student loan payments, falling cash savings, a tighter credit market, and fears of another round of Fed rate hikes.
American consumer spending jumped 0.8 percent in July, led by the entertainment and travel sectors, which saw a summer boost, while retail sales slightly increased by 0.7 percent.
However, as the summer winds down, the hospitality industry is bracing for a slowdown.
" Conservative News Daily does not always share or support the views and opinions expressed here; they are just those of the writer."
