U.S. Small Business Optimism Sinks To 9-Month Low On Inflation Worries

(RTTNews) - Confidence among U.S. small businesses fell unexpectedly in February to its lowest level in nine months as firms continued to remain worried about inflation, survey data from the National Federation of Independent Business showed Tuesday. The NFIB Small Business Optimism Index fell to 89.4 from 89.9 in January. Economists had forecast a score of 90.5.

The latest reading, which was the lowest since May last year, marked the 26th consecutive month below the 50-year average of 98, the NFIB said. The proportion of small business owners reporting inflation as their single most important business problem rose to 23 percent from 20 percent. Inflation replaced labor quality as the top problem, the survey revealed.

"While inflation pressures have eased since peaking in 2021, small business owners are still managing the elevated costs of higher prices and interest rates," NFIB Chief Economist Bill Dunkelberg said. "The labor market has also eased slightly as small business owners are having an easier time attracting and retaining employees."

The share of small businesses reporting labor quality as their main problem decreased five points to 16 percent, which was the lowest reading since April 2020.

The survey also showed that the small business owners remained hesitant to fill open positions with a net 12 percent planning to create new jobs in the next three months, the weakest level since May 2020. The net percent of owners who expect sales growth rose six points from January to a net negative 10 percent.

The share of firms raising selling prices eased by a point to a net 21 percent, which was the lowest print since January 2021.

A net 30 percent plan price hikes in the coming months. A seasonally adjusted 19 percent of small businesses plan to raise compensation in the next three months, which was down seven points from January and the lowest since March 2021, the survey said.

The share of those citing labor costs as their main problem rose to 11 percent from 10 percent. This score was only two points below the highest reading of 13 percent in December 2021. The survey was conducted in February among a sample of 5,000 small businesses.