U.S. Small Business Optimism Falls to 11-Month Low in January

By Raeedah Wahid

Sentiment among U.S. small businesses fell in January as owners remained wary of high inflation, worker shortages and future economic conditions.

Photo by RODNAE Productions from Pexels

The National Federation of Independent Business optimism index fell to 97.1 from 98.9, the lowest since February 2021, the group said Tuesday. The median estimate in a Bloomberg survey of economists called for a decrease to 97.5.

Inflation remains a top concern for small businesses, and a net 61% of owners raised average selling prices. That’s the highest in monthly data back to 1986. In another sign of inflationary pressures, a record 50% of firms said they boosted compensation amid difficulty attracting qualified talent. 

“More small business owners started the new year raising prices in an attempt to pass on higher inventory, supplies and labor costs,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Owners are also raising compensation at record high rates to attract qualified employees to their open positions.”

Seven out of the 10 components in the optimism index declined in January as Covid-19 cases reached record highs. The net percent of owners expecting higher sales in the next three months dropped to -3%, the lowest since July. Just 9% said now is a good time to expand, the least since February.

Inventory accumulation plans fell to an 11-month low. Furthermore, the net share who reported higher inventory in the last three months rose to the highest since 2000. Inventories accounted for most of the growth in the U.S. economy in the fourth quarter.

More stories like this are available on bloomberg.com

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