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Economy in Brief

U.S. Small Business Optimism Index Edged Up in November
by Sandy Batten  December 14, 2021

• Small Business Optimism edged up 0.2 point in November.

• Four of the 10 index's components rose, four declined and two were unchanged.

• A net 59% of small business owners increased prices, the highest level since 1979.

The Small Business Optimism Index edged up to 98.4 in November from 98.2 in October as small business owners remained concerned over rising inflation and supply-chain disruptions that are adversely impacting their businesses. Four of the index's 10 components increased, four declined and two were unchanged in November. The NFIB Uncertainty Index decreased four points to 63.

The net balance of respondents expecting the economy to improve over the next six months dropped to -38% in November, tying November 2012 for a 48-year low, from -37% in October. This was the fifth consecutive monthly decline. This indicator has declined 18%-points over the past five months. Fifty-five percent reported making capital outlays in the past six months, down slightly from 56% in October. Twenty-seven percent expect to make a capital outlay in the next three to six months, down 4%-points from October.

Inflation pressures continued to intensify with 18% of respondents citing it as their most important problem (the highest reading since 2008). The net percent of respondents raising average selling prices increased 6%-points to a net 59% (seasonally adjusted), the highest reading since 1979. Price hikes were the most frequent in wholesale (88% higher, 0% lower), construction (75% higher, 7% lower), and manufacturing (66% higher, 1% lower). A net 54% of owners plan price hikes, a 48-year record high reading, up three points from October.

Twenty-nine percent of respondents cited the quality of labor as their most important problem, a new record high, while 10% cited labor costs. Forty-eight percent of respondents reported job openings that could not be filled, a decrease of 1%-point from October, but just 3%-points below the all-time high in September. A net 44% reported raising compensation over the past three months, the same as the record high reading in October. A net 32% plan to raise compensation in the next three months, also unchanged from October's record high reading.

Thirty-five percent of respondents reported that supply-chain disruptions have had a significant impact on their business, 31% reported a moderate impact, and 22% reported a mild impact. Only 9% of respondents reported no impact from recent supply-chain disruptions. The net percent reporting inventory increases rose to a net 3%. A net 15% viewed current inventory stocks as "too low" in November, a record high, up 6%-points from October. A net 10% plan inventory investments in the coming months, up 2%-points from October and historically a very elevated reading.

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) Nov Oct Sep Nov '20 2020 2019 2018
Small Business Optimism Index (1986=100) 98.4 98.2 99.1 101.4 99.6 103.0 106.7
Firms Expecting Economy to Improve -38 -37 -33 8 20 13 32
Firms Expecting Higher Real Sales 2 0 2 10 1 18 26
Firms Reporting Now Is a Good Time to Expand the Business 10 10 11 12 13 25 30
Firms Planning to Increase Employment 25 26 26 21 16 19 21
Firms With Few or No Qualified Applicants for Job Openings (%) 56 58 62 47 46 52 51
Earnings Trends -17 -17 -14 -7 -16 -5 -2
Firms Reporting that Credit Was Harder to Get 1 2 4 2 3 4 4
Firms Raising Average Selling Prices 59 53 46 18 5 13 15
Firms Raising Worker Compensation 44 44 42 24 23 31 33
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