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Economy in Brief

U.S. Small Business Index Weakens in October
by Tom Moeller  November 8, 2022

• Decline reverses September rise.

• Economy & employment plans fall.

• Current inflation index falls but expectations surge.

The NFIB Small Business Optimism Index declined to 91.3 in October from 92.1 in September, according to the Small Business Economic Trends survey conducted by the National Federation of Independent Business. The reading remained above the June 2022 low of 89.5. The NFIB Uncertainty Index held steady at 72 in October.

Seven of the index's ten components declined in October. The percent of firms expecting the economy to improve fell to -46%, a three-month low. The index of planned employment fell to 20%, also its lowest level in three months. The percentage of expected real sales in six months declined to -13% last month from -10% in September. The index of expected capital outlays fell to 23%, down from an October 2021 high of 31%. Expected credit conditions fell to -8% and reversed the September improvement. Those reporting that now was a good time to expand deteriorated minimally to 5% and also reversed the prior month's gain. The percentage reporting that inventories were too low fell to zero from one, down from 15% in November of last year.

Moving upward, the trend measure of earnings edged higher to -30%, the highest level in three months. The percentage of firms planning to raise inventories rose to two percent and reversed half of the September decline. The percent of firms with positions they were unable to fill now held steady at 46%, the lowest since June of last year.

On the pricing front, the percentage of firms now raising prices eased to 50% from 51% and remained down from a 66% March high. The percentage of firms planning to raise prices rose sharply to 34%, the largest percentage in three months. As for labor costs, the percentage of firms raising compensation during the last three months eased to 44% from 45%, the lowest percentage since November 2021. The percentage of firms planning to raise compensation surged to 32% last month from 23% in September. It stood at the highest level since December 2021, up from a September low of 23%.

The single most important problem facing small business was inflation, reported 33% of NFIB members, up from nearly zero at the beginning of last year. The quality of labor was reported as the most important problem by 23% of respondents, down from a November 2021 high of 29%. The cost of labor was reported as the most important problem by a steady 10% of firms, up from eight percent in June.

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.

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