Sentiment in US small businesses sinks to half-year low

U.S. small business confidence fell to a six-month low in December. That’s according to a survey released Tuesday, which also shows that inflation and labor shortages remain important issues for business owners.

The National Federation of Independent Business (NFIB) said its Small Business Optimism Index fell 2.1 points last month to 89.8 – the lowest level since June – and that the share of owners expecting better business conditions in the next six months declined.

It was the 12th consecutive month the index has been below the 49-year average of 98. The percentage of business owners expecting better business conditions in the next six months fell from -43% in November to -51% last month. As recently as June, it was -61%.

Thirty-two percent of business owners said inflation was their most important concern. That’s unchanged from November and down 5 points from July, when the highest reading since the fourth quarter of 1979 was recorded. Overall, about 43% of owners said they would raise average sales prices. That’s 8 points lower than in November and the lowest reading since May 2021.

Forty-one percent of business owners reported that job openings are difficult to fill, down 3 points from November. Difficulty filling job openings was highest in transportation, manufacturing and construction, according to the NFIB.

“Overall, small business owners are not optimistic about 2023, as sales and business conditions are expected to worsen,” said William Dunkelberg, NFIB chief economist. “Owners are struggling with several economic uncertainties and ongoing inflation, and continue to make business and operational changes to compensate.”