February 8, 2023

Unitranche

Supportive Business Potential

Small Business Optimism Index rises

William Dunkelberg

A measure of optimism among small business owners has increased on improving expectations for the economy, sales and profits.

The National Federation of Independent Business reported its Small Business Optimism Index rose six-tenths of a point to 91.9 in November. The reading has remained below the 49-year average of 98 for 11 straight months, however.

“Going into the holiday season, small business owners are seeing a slight ease in inflation pressures, but prices remain high,” said Bill Dunkelberg, chief economist for the NFIB. “The small business economy is recovering as owners manage an ongoing labor shortage, supply chain disruptions and historic inflation.”

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.

For November, six of 10 components of the index advanced and four retreated.

The proportion of NFIB members responding to the survey upon which the November index was based who expected the economy to improve rose three points from October. But at net negative 43 percent, a recession-level reading, more members anticipated worsening conditions.

A net 24 percent reported plans for capital outlays, up a point. A net 6 percent said they consider now a good time to expand, also up a point.

The share of those who expected increased sales rose five points. But at net negative 8 percent, more still forecast decreased sales.

Expectations for profits rose eight points, but only to a net negative 8 percent. Among those reporting lower profits, 29 percent cited rising costs and 25 percent blamed weaker sales.

A net 18 percent of survey respondents reported plans to increase employment, down two points. A net 44 percent cited unfilled job openings, also down two points.

Asked to identify their single most important business issue, 32 percent cited inflation. That’s down five points from a 43-year high reading in July.

A net 51 percent of respondents reported raising average selling prices. Price hikes were most frequent in the wholesale, retail and construction sectors.

The share of respondents who reported plans to increase inventories fell six points to a net negative 4 percent. The proportion of those who said existing current inventories were too low fell two points to a net negative 2 percent.