Haver Analytics
Haver Analytics
| Aug 08 2023

U.S. NFIB Small Business Optimism Index Shows Less Pessimism in July Amid Challenging Economic Environment

  • July NFIB Optimism Index rises 0.9 pts. to 91.9; its 19th straight month below the 49-year average of 98.
  • Small Business Uncertainty Index increases to 80; highest since June ’21.
  • Outlook for business conditions in the next six months, while improving, remains in negative territory, at -30%; expected real sales up only two pts. to -12%, still a pessimistic perspective.
  • Regarding Single Most Important Problem, inflation remains a major business concern as does the quality of labor.

The NFIB Small Business Optimism Index rose to 91.9 in July, the highest level since November, from 91.0 in June, according to the July 2023 Small Business Economic Trends survey conducted by the National Federation of Independent Business. The latest reading, while up marginally from 89.9 in July 2022, had been below the 49-year average of 98 for the 19th consecutive month. Five of the 10 index components rose, one fell, and four were unchanged. The NFIB Small Business Uncertainty Index increased to 80 in July, the highest level since June 2021, from 76 in June; it was up from 67 in July last year.

The outlook for business conditions in the next six months improved but remained negative. The net balance of respondents expecting the economy to improve over the next six months rose 10 points to -30% in July from -40% in June; it was up from -52% in July 2022 and a record low of -61% in June 2022. Expected real sales increased to a net -12% in July, the highest level since February, from -14% in June. Although the latest reading remained pessimistic, it was up from a low of -29% in July last year. Plans to make capital outlays improved to 27% in July, the highest level since April 2022, from 25% in June; it was up from 22% in July last year. Meanwhile, plans to expand the business were unchanged at a net 6% in July, slightly up from 4% in July last year. Expected credit conditions held steady at -8% in July, marginally down from -7% in July 2022.

Labor markets remain tight with 56% of respondents reporting that qualified workers to fill job openings were hard to find in July. The latest figure was up two points from 54% in June but down from 57% in July 2022 and a 61% high in May 2022. A net 17% planned to increase employment in July, up two points from 15% in June but slightly down from 20% in July last year. Notably, a steady 42% reported positions not able to be filled in July, remaining historically very high; it was down from 49% in July 2022 and a recent-high 51% in May 2022. Overall earnings trends fell to -30% in July, the lowest level since December, from -24% in June; the latest figure was down from -26% in July 2022.

On the pricing front, inflation pressures, while trending down, remained at a very inflationary level. The net percent raising their average selling prices declined to a still-high 25% in July, the lowest reading since January 2021, from 29% July; it was down from 56% in July 2022 and a 66% high in March 2022. The percentage planning to raise prices fell to 27% in July after rising two points to 31% in June; it was below 37% in July 2022 and a 52% high in March 2022.

Wage inflation also remained high as a net 38% of respondents raised compensation during the last three months, up from 36% in June. Nevertheless, it was down from 48% in July 2022 and a peak of 50% in January 2022. A net 21% of firms planned to raise worker compensation in the next three months, slightly down from 22% in June and 25% in July 2022.

Inflation continued to be a problem facing small businesses, as reported by 21% of NFIB members in July, down from 24% in June and 37% in July 2022. However, the quality of labor (23% vs. 24%) had taken over as the single most important problem facing small businesses. Other concerns (in July vs. June) included taxes (16% vs. 15%) and the cost of labor (10% vs. 8%).

According to the Small Business Administration, there are 33 million small businesses in the United States, which employ 62 million workers. The NFIB surveys anywhere from 500 to 2000 respondents each month and the typical firm employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver’s SURVEYS database.

  • Winnie Tapasanun has been working for Haver Analytics since 2013. She has almost 20 years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations.   Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia.   Winnie is bilingual in English and Thai with competency in French. She loves to travel (almost 30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.

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