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Economy in Brief

Small Business Optimism Slipped in September
by Sandy Batten  October 12, 2021

• NFIB Optimism Index fell in September to lowest level since March.

• Three of the 10 index components rose, five declined and two were unchanged.

• Lack of qualified workers and supply-chain bottlenecks still major impediments.

The Small Business Optimism Index fell to 99.1 in September, the lowest reading since March, from 100.1 in August, according to the National Federation of Independent Business. Only three of the index's 10 components increased, five declined and two held steady. The NFIB Uncertainty Index rebounded to 74 in September after having fallen to 69 in August, the lowest level since January 2016.

The net balance of respondents expecting the economy to improve over the next six months dropped to -33% in September, the lowest level since December 2012, from -28% in August. This was the third consecutive monthly decline. Fifty-three percent reported making a capital outlay in the past six months, down 2%-points from August and historically a weak reading. Only 28% expect to make a capital outlay in the next three to six months.

Fifty-one percent of respondents reported job openings that could not be filled, the third consecutive 48-year record high. And a net 42% reported raising compensation, also a 48-year record high. A net 30% plan to raise compensation in the next three months, up 4%-points from August's record high reading. Twelve percent cited labor costs as their top business problem and 28% said that labor quality was their major problem. Both were record high readings.

Over 35% of respondents reported that supply-chain disruptions have had a significant impact on their business. Another 32% report a moderate impact and 21% report a mild impact. Only 10% of owners report no impact from recent supply-chain disruptions. A net 10% viewed current inventory stocks as "too low" in September, down 1%-point from August.

Inflation pressures remain elevated although the net percent of respondents raising average selling prices decreased 3%-points to a net 46% (seasonally adjusted). Unadjusted, 8% reported lower average selling prices and 53% reported higher average prices. Price hikes were the most frequent in wholesale (75% higher, 0% lower), manufacturing (67% higher, 4% lower), and retail (71% higher, 2% lower). Seasonally adjusted, a net 46% plan price hikes, the highest reading since the early 1980s.

Roughly 24 million small businesses exist in the U.S. and they create 80% of all new jobs. The typical NFIB member employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver's SURVEYS database.

National Federation of Independent Business (SA, Net % of Firms) Sep Aug Jul Sep '20 2020 2019 2018
Small Business Optimism Index (1986=100) 99.1 100.1 99.7 104.0 99.6 103.0 106.7
Firms Expecting Economy to Improve -33 -28 -20 32 20 13 32
Firms Expecting Higher Real Sales 2 -2 -4 8 1 18 26
Firms Reporting Now Is a Good Time to Expand the Business 11 11 13 13 13 25 30
Firms Planning to Increase Employment 26 32 27 23 16 19 21
Firms With Few or No Qualified Applicants for Job Openings (%) 62 60 57 50 46 52 51
Earnings Trends -14 -15 -13 -12 -16 -5 -2
Firms Reporting that Credit Was Harder to Get 4 3 2 2 3 4 4
Firms Raising Average Selling Prices 46 49 46 13 5 13 15
Firms Raising Worker Compensation 42 41 38 23 23 31 33
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