A monthly measure of optimism among small business owners declined again in February as concerns about inflation and interest rates persisted. The National Federation of Independent Business reported its Small Business Optimism Index slipped a half point to 89.4. The index has remained below its 50-year average of 98 for 26 straight months. “While inflation pressures have eased since peaking in 2021, small business owners are still managing the elevated costs of higher prices and interest rates,” said Bill Dunkelberg, chief economist of the NFIB. “The labor market has also eased slightly as small business owners are having an easier time attracting and retaining employees.” 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 January and February, seven of 10 components of the index retreated, two increased and one remained unchanged. The proportion of NFIB members who responded to the survey upon which the February index was based who expected the economy to improve fell a point. At a net negative 39 percent, more owners anticipated worsening conditions ahead. A net 21 percent of members reported plans for capital outlays, down two points from January. A net 5 percent said they consider now a good time to expand, down three points. The share of members who expected increased sales rose six points. But at net negative 10 percent, more members still anticipated decreased sales. Expectations for increased earnings fell a point to a net negative 31 percent. Among members reporting lower profits, 29 percent blamed weaker sales and 15 percent cited rising materials costs. A net 12 percent of members reported plans to increase staffing, down two points to the lowest level since May 2020. A net 37 percent reported hard-to-fill job openings, also down two points. Asked to identify their single most important problem, 23 percent cited inflation. Another 16 percent of members cited the quality of labor, down five points to the lowest level since April 2020, and 11 percent cited the cost of labor. The proportion of members who reported plans to increase inventories fell four points to a net negative 7 percent. The share of those who said existing inventories were too low remained unchanged at a net negative 4 percent.
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