A measure of optimism among small business owners has dropped along with their expectations for the economy, sales and staffing. The National Federation of Independent Business reported its Small Business Optimism Index fell two points to 89.9 in January. The index remained below its average reading of 98 for a 25th consecutive month. “Small business owners continue to make appropriate business adjustments in response to the ongoing economic challenge they’re facing,” said Bill Dunkelberg, chief economist of the NFIB. “In January, optimism among small business owners dropped as inflation remains a key obstacle on Main Street.” The NFIB bases the index on the results of monthly surveys of members of the small business advocacy group, most of them small business owners. Between December and January, six of 10 components of the index decreased, two increased and two remained unchanged. The proportion of NFIB members who responded to the survey upon which the January index was based who expect the economy to improve fell two points. At a net negative 38 percent, more members anticipated worsening conditions. A net 23 percent of members reported plans for capital expenditures, down a point. A net 8 percent said they consider now a good time to expand, unchanged from the previous month. The share of members who said they expected increased sales dropped 12 points to a net negative 16 percent. Expectations for increased earnings fell five points. At a net negative 30 percent, more owners anticipated decreased earnings. Among members reporting lower profits, 32 percent blamed weaker sales and 15 percent cited higher material costs. A net 14 percent of members reported plans to increase staffing, down two points. A net 39 percent reported hard-to-fill job openings, down a point. Asked to identify their single most important problem, 21 percent cited the quality of labor and 20 percent cited inflation. A net 22 percent of members reported raising average selling prices, down three points from December. A net 15 percent reported lower prices, the largest proportion since August 2020. Price hikes were most prevalent in the wholesale, retail, services and construction sectors. The proportion of members who reported plans to increase inventories rose two points. But at a net negative 3 percent, more members planned decreases. The share of members who called current inventories too high rose a point to a net negative 4 percent.
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