Small Business Optimism Holds Near 52-Year Average in January
The NFIB Small Business Optimism Index edged down 0.2 points to 99.3 in January, remaining slightly above the 52-year average of 98. January’s increase was due primarily to the rise in those expecting better real sales volume. Of the 10 components included in the index, three increased and seven decreased. Meanwhile, the Uncertainty Index jumped 7 points to 91, remaining well above the 51-year average (68) and above the average since 2016 (80).
Small business owners again cited taxes as their top concern, with 18% reporting it as the most important problem, down 2 points from December. The share of business owners reporting labor quality as their top problem fell 3 points from December to 16%, with 31% struggling to fill open jobs and 50% reporting hiring or trying to hire in January. Meanwhile, the cost or availability of insurance was third on the list of concerns, with 13% reporting it as a top problem, up 4 points from the prior month and the highest level since December 2018.
A net 32% of small business owners reported raising compensation, up 1 point in January after rising 5 points in December. Meanwhile, 22% of business owners plan to raise compensation in the next three months, down 2 points from December. Pressure on profitability strengthened in January, with positive profit trends decreasing 1 point from December to a net negative 21%. Among owners reporting lower profits, 34% blamed weaker sales, 14% mentioned usual seasonal changes and 10% noted labor costs. Meanwhile, 3% reported their last loan was harder to get than previous attempts, down 2 points from December, and a net negative 6% of owners cited paying a higher interest rate on their most recent loan, down 3 points from the prior month.
The outlook for general business conditions fell 3 points to 21%. Furthermore, expectations for better business conditions are 26 points below the same month a year ago. On the other hand, 15% reported that it is a good time to expand their business, up 2 points from December but a rather weak reading compared to times of economic expansion. Despite overall growth running hot, small business owners feel like economic conditions are more moderated, with investment-led growth not hitting all sectors equally.