Small Business Optimism Index Sees Rise in July
The National Federation of Independent Business (NFIB) Small Business Optimism Index rose for the first time since December of last year, inching up 0.4 points in July to 89.9.
According to Wells Fargo, the increase in the overall index results from a slight moderation in some of the aspects of the business environment that deteriorated sharply during the first half of the year.
Even with the improvement, the Small Business Optimism index has remained below its 48-year average of 98 for six straight months. Only four of the survey's 10 components rose in July, while six declined.
A nine-point rise in the share of firms expecting economic conditions to improve broke a six-month skid, but remains well into negative territory at -52 percent. The series remains at a historically low level and suggests most business owners remain cautious about the economic outlook.
Inflation remains the top concern for business owners, followed by the continued difficulty in finding qualified workers. Business owners are also concerned that, with the economy slowing, they will have a more difficult time passing along their higher costs to their customers.
The proportion of firms reporting they raised prices in the past three months fell four points in July, but remains relatively high at 65 percent. This series topped out at 72 percent in March. The proportion raising compensation was unchanged at 48 percent, a level that is in line with other recent reports on compensation and wages.
The National Federation of Independent Business (NFIB) Small Business Optimism Index edged 0.4 points higher in July to 89.9. The rise marked the first improvement in the index since December and reflects some relief from what had been a relentless rise in energy prices.
While small business optimism edged higher, business owners continue to express a great deal of concern about the economic environment. Only four of the index's ten component increased, while six declined. The index also remained below its 48-year average of 98 for the sixth consecutive month.
The proportion of business owners expecting business conditions to improve over the next six months rose nine points to -52 percent.
July's increase comes off a record-low level hit the prior month. Inflation repeatedly came in above expectations throughout the first half of the year, which meant the Fed would have to raise interest rates more aggressively.
The latest survey shows that 37 percent of business owners believe inflation is the single most important problem in operating their business. This is up three points from June, and the highest share citing inflation concerns since Q4-1979.
The share of business owners looking to hire workers over the next three months ticked up one percentage point to 20 percent in July.
Hiring plans in 2022 have been roughly even with pre-pandemic levels, hovering around the 20 percent mark. The slight uptick in hiring plans was at odds with the July nonfarm employment report, which saw payrolls surge by 528,000 jobs.