US Small-Business Optimism Plummets Biggest Drop Since 2022 End

14 Feb, 2024

US Small-Business Optimism Plummets Biggest Drop Since 2022 End

U.S. small-business optimism witnessed a notable decline in January, marking the most substantial drop in over a year. The National Federation of Independent Business reported a 2-point decrease in the overall index, plunging to 89.9, the sharpest monthly decline since December 2022. This downturn primarily stemmed from diminishing sales expectations and deteriorating profits.

The share of small-business owners anticipating higher real sales volumes experienced a significant slump of 12 percentage points compared to the previous month, marking the most considerable drop since mid-2022. Furthermore, a greater proportion of owners reported lower earnings over the past three months.

NFIB's chief economist, Bill Dunkelberg, emphasized the ongoing economic challenges faced by small-business owners, indicating that a more positive outlook on the future economy and economic policy would stimulate longer-term investment spending. However, current sentiments regarding the future remain unsupportive, compounded by high financing costs.

Employment plans among small-business owners hit a low not seen since May 2020, with a mere 39% planning to increase hiring. Additionally, a vast majority cited difficulties in filling job openings due to a lack of qualified candidates.

Despite cooling inflation, it remains a significant concern for many businesses, with a considerable portion of owners identifying it as their primary challenge. Meanwhile, 15% of owners reported reducing selling prices, representing the largest share since August 2020.