Haver Analytics
Haver Analytics
USA
| Jan 10 2023

U.S. Small Business Optimism Falls in December to the Lowest Level Since June

Summary
  • December NFIB Optimism Index down 2.1 pts. to 89.8; its 12th straight month below the 49-year average of 98.
  • Eight of the 10 index components decline.
  • Uncertainty Index rebounds to 71 in Dec. after falling to a four-month low in Nov.
  • Outlook for business conditions in the next six months worsens to the lowest level since July; expected real sales fall two pts. to a net negative 10%.
  • Inflation remains top business concern.
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The NFIB Small Business Optimism Index was at 89.8 in December, down from 91.9 in November and 91.3 in October, according to the December 2022 Small Business Economic Trends survey conducted by the National Federation of Independent Business. The December figure was the lowest level since 89.5 in June 2022 and down from 98.9 in December 2021 and markedly below the 49-year average of 98. Eight of the 10 index components fell, one increased, and one held steady. The NFIB Small Business Uncertainty Index rebounded to 71 in December from a four-month-low 68 in November; it was only one point down from 72 in December 2021.

The outlook for business conditions in the next six months deteriorated. The net balance of respondents expecting the economy to improve over the next six months dropped eight points to -51% in December, the lowest level since July, from -43% in November and -35% last December; thus, indicating a probability of the economy being in a recession this year. Expected real sales fell to a net -10% in December from -8% in November and 3% last December. Although the latest reading remained very weak, it was up from a recent low of -29% in July. Plans to make capital outlays fell back to 23% from 24% in November and 29% last December. Plans to expand the business slipped to a net 5% in December after improving to 6% in November; these figures were below 11% last December.

Labor markets remain tight with 51% of respondents reporting that qualified workers to fill job openings were hard to find in December. The latest figure, while the lowest since March 2021, was down only three points from 54% in November and down from a high 61% in May and 57% last December. A net 17% planned to increase employment in December, the lowest reading since January 2021, but it was only one point down from 18% in November and down from 28% last December. Notably, 41% reported positions not able to be filled in December, remaining historically very high; it was down only three points from 44% in November and down from a recent-high 51% in May and 49% last December. Overall earnings trends fell to -30% in December from -22% in November and -14% last December.

On the pricing front, inflation pressures have receded recently but remained high. The net percent raising their average selling prices was a historically high 43% in December, down from 51% in November, a recent-high 66% in March and 57% last December. The percentage planning to raise prices fell 10 points to 24% in December from 34% in November and October; it was meaningfully down from a recent-high 52% in March and 49% last December.

Wage inflation also remained high as a net 44% of respondents raised compensation during the last three months, up four points from 40% in November. However, it was down from the January ’22 peak of 50% and 48% in December ’21. A net 27% of firms planned to raise worker compensation in the next three months, only one point down from 28% in November and five points down from 32% last December.

The single most important problem facing small businesses continued to be inflation, reported 32% of NFIB members in December and November, up 10 points from 22% last December. Other most important problem included the following concerns, notably the quality of labor (23% in Dec. vs. 21% in Nov.), taxes (unchanged at 11%), and the cost of labor (8% in Dec. vs. 9% in Nov.).

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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  • 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 (~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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